**[investwise]** Sugar-The Shallowest Boom, But A Deeper And Much Longer Slump

 

Government measures to control soaring sugar prices seem to have had its impact on the sugar stocks listed on the BSE. Prices have been on a steady decline after the Government slapped various restrictions, including introduction of fortnightly nonlevy sugar sale.   Non-levy or free-sale sugar is sold by companies in the open market, but the quantity to be sold was fixed by the Government on a monthly basis, which cut down to fortnightly basis to improve supply.   The move had lead to sugar prices crashing from a record high of Rs 4,050 a tonne in January to Rs 2,704 on Friday. The fortnightly quota for non-levy sugar sale and falling prices had forced many traders to offload their inventory resulting in further fall in prices.   Sugar stocks may come under further pressure, as the Government has revised sugar production to 18 million tonnes (mt) for the current season ending October against the earlier estimate of 16 mt on the back of higher sugar recovery. With huge incentive for farmers to cultivate more cane, the sugar production is set to increase further next season and that will put further pressure on prices, said an analyst.   After various representations by the sugar companies, the Government has switched back to the earlier system of monthly fixation for sale of non-levy sugar sale.   DUTY-FREE IMPORTS   Global sugar prices have plunged in the last few days on the prospect of India importing lesser sugar than the earlier estimate. London sugar prices were down from the high of $767 to $537 a tonne in last two months as India slashed its import requirement to 3.5 mt to 7 mt. Besides lower imports by India, reports of improved crop prospects in Brazil have hit international sugar prices.   UNCERTAINTY LOOMS   Sugar prices may witness an uptick in prices in the short term due to the Government measures to tighten supplies.   The quantum of sugar production will not only ease the demand-supply mismatch (18 mt of production and 4.8 mt of imports against a demand of 23 mt), but will also keep a tab on global sugar prices, said Mr Ankur Periwal, Research Analyst, Religare Capital Markets. Though the sugar stocks might witness a bounce back in the near term, concerns loom large over the sustainability of such an uptrend over the long term, he added. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.   Nothing in this article is, or should be construed as, investment advice.

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