INDIA: END OF THE SUGAR CYCLE?
PRESENTED BY:ABINASH VERMA, DG, ISMA
Outline of Presentation
The Indian Sugar Cycle
Factors impacting the Cycle
Do we see an end to the Cycle?
Can the Cycle be better Managed?
2012-13 and 2013-14 seasons
2
Sugar Production Cycle in last 10 years
3
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13 (E)
18.5 18.520.1
13.5 12.7
19.3
28.426.4
14.5
18.9
24.426.0
24.0
Sugar Production in million tons
The year-wise swings: Since 2000-01
Period No. of seasons
Range (mn tons)
Swing from previous high/low (mn tons)
Swing %
00-01 to 02-03
3 18.5 to 20.1
03-04 to 04-05
2 13.5 to 12.7 (-) 6.6 (-)33%
05-06 to 07-08
3 19.3 to 28.4 (+) 6.6 (+)52%
08-09 to 09-10
2 14.5 to 18.9 (-) 11.9 (-)42%
10-11 to 12-13
3 24.0 to 26.2 (+) 5.5 (+)29%
4
Production–Consumption in last ten years
5
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13(E)
Production (mln ton) Consumption(mln ton)
Cyclical sugar trade in last 20 years…….6
0.5620000000000010.4110.01 0.063
1.0210.419
0.069 0.022 0.066
0.987 1.0821.767
0.2660.00400000000000001
1.1071.728
4.956
0.165 0.235
2.6
3.5
-2
-0.2-0.935-1.003
-0.404 -0.124-0.553
-2.138 -2.403
-4.08
0
Import ( mln tn) Exports (mln tns)
Therefore, The Cycle is …………
Indian sugar production follows a 5 year cycle
2 to 3 year of high production; followed by
2 to 3 years of low production; and vice versa ….
Consumption growth is linear
Results in huge swings in the sugar equation
7
Outline of Presentation
The Indian Sugar Cycle
Factors impacting the Cycle
Do we see an end to the Cycle?
Can the Cycle be better Managed?
2012-13 and 2013-14 seasons
8
Sugar production dependant on …..
1. Cane productionArea under sugarcane
Weather & Rainfall
2. Cane drawal by sugar industryPrice of cane offered by sugar industry
Diversion into gur, khandsari etc.
3. Government policies
9
Fluctuations in cane area and production
Price for cane and Arrears of farmers Returns from alternative crops like wheat, paddy, cotton,
turmeric etc.
10
0
1
2
3
4
5
6
0
100
200
300
400
500
600
Cane Area (mln. ha) Cane Production (Mln.Tonnes)
Sugar Production & Sugar Price 11
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
10.00
30.00
1000
1200
1400
1600
1800
2000
2200
2400
2600
2800
3000
3200Sugar Production( mln tn)
Price Trend
Cane Price Arrears (as on 30th June in Rs. crore)
12
1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
7451031
1800
3182
1286
209 215
4185
1955
231
752
1216
4600
The Indian Sugar Cycle
Decline in sugar prices
Lower Profitability/losses
High Cane price arrears
Decline in area under cane
Lower sugarcane productionLower Sugar
ProductionHigh sugar prices
Improved Profitability
Good, timely cane price payments
High Sugarcane Production
High Sugar Production
Although 93% of India’s cane crop is irrigated, performance of the 4 month (Jun-Sept) monsoon season has a significant impact on crop output
This affects yield as well as sucrose formation impacting sugar recovery
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 20090
5
10
15
20
25
30
35
40
Indian variability of Monsoons
Excess/Normal Deficient/Scanty
Num
ber
of s
ubdi
visi
ons
Cane Yield15
70.968.6 67.4
63.6
59.4
64.866.9
69 68.9
64.5
70 70.168.5
Yield (ton/...
Cane diversion for alternate sweeteners
1980
-81
1981
-82
1982
-83
1983
-84
1984
-85
1985
-86
1986
-87
1987
-88
1988
-89
1989
-90
1990
-91
1991
-92
1992
-93
1993
-94
1994
-95
1995
-96
1996
-97
1997
-98
1998
-99
1999
-2000
2000
-01
2001
-02
2002
-03
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09 -
50
100
150
200
250
300
350
400
Cane for Seed For Jaggery Cane for sugar
mm
t
Substantial variation in yearly drawals - Higher drawals in low production years and lower in high production years
Cane drawal by sugar industry
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 20010-11
20011-12
59.7% 60.7%
67.6%
56.7%
52.6%
67.1%
78.6%
71.8%
50.9%
63.5%
72.0%71.7%
Policy Contribution to the Cyclicality
Regulated Release Mechanism Control on sugar prices & Blockage of working capital
Levy Sugar Obligation on mills Carry forward of levy sugar, blockage of capital
Export-Import of Sugar Timing and quantity permissions
Cane Price Unreasonably high and no linkage with sugar price
18
Cane Price Arrears vis-à-vis Sugar Inventory19
Cane price arrears directly related to sugar inventory which industry forced to carry Industry has no control on cash flow which are need to pay cane price to farmers
during crushing season.
October NovemberDecember January February March April May June0
100020003000400050006000700080009000
10000
020406080100120140160180200
2011-12
Sugar Inventory (lk tn) Cane Arrears( Rs. Cr.)
Outline of Presentation
The Indian Sugar Cycle
Factors impacting the Cycle
Do we see an end to the Cycle?
Can the Cycle be better Managed?
2012-13 and 2013-14 seasons
20
Production–Consumption in last ten years
21
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13(E)
Production (mln ton) Consumption(mln ton)
Production–Consumption in last ten years
22
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13(E)
Production (mln ton) Consumption(mln ton)
Policy front …….
Permissions in last 2 years for exporting the surplus Timing and Quantities
Market for Indian sugar
Cash Flow needs better met Quarterly release mechanism
Levy sugar: Conversions and ‘Carry forward’ rule
Sugar price vis-à-vis cost of production Government and public awareness and acceptance
23
Sugar Production & Sugar Price 24
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
10.00
30.00
1000
1200
1400
1600
1800
2000
2200
2400
2600
2800
3000
3200Sugar Production( mln tn)
Price Trend
Cane Price Arrears
High Cane Price Arrears are usually followed by fall in Cane
Acreage and fall in sugar production
It is not expected to happen in 2012-13
25
1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
7451031
1800
3182
1286
209 215
4185
1955
231752
1216
4600
Diversion of cane and area
Price of competing crops Returns to farmers from wheat, paddy, cotton, turmeric etc.
Cane drawal for gur, jaggery, khandsari etc. Price offered by alternate sweetener manufacturers
26
Outline of Presentation
The Indian Sugar Cycle
Factors impacting the Cycle
Do we see an end to the Cycle?
Can the Cycle be better Managed?
2012-13 and 2013-14 seasons
27
Management of the Surplus: suggestions
Freedom from Government controls
Cane price – sugar price linkage
Freer trade policy
Diversion of surplus cane into ethanol
Diversion to alternate sweeteners
28
Outline of Presentation
The Indian Sugar Cycle
Factors impacting the Cycle
Do we see an end to the Cycle?
Can the Cycle be better Managed?
2012-13 and 2013-14 seasons
29
Sugar Production Cycle in last 10 years
30
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13 (E)
18.5 18.520.1
13.5 12.7
19.3
28.426.4
14.5
18.9
24.426.0
24.0
Sugar Production in million tons
2012-13 and 2013-14: Will the Cycle come back?
2012-13: Very good cane price in 2011-12
Cane area higher by 4% over previous 2 seasons
Doubts regarding rainfall in Maharashtra and Karnataka
Rains have picked up in last 2 weeks
Highest ever cane area in Uttar Pradesh
Estimated sugar production of 24.0 million tons
31
2012-13 and 2013-14: Will the Cycle come back?
2013-14: Price for competing crops vis-a-vis cane price
Cane price arrears in 2012-13?
Sugar prices covering cost of production
Surplus sugar in 2012-13 not as large as in previous years
With some late rainfall and the outcome of retreating monsoon,
reservoirs in Maharashtra and Karnataka may have more water
18 month crop in Maharashtra showing signs of picking up
However, still very early to estimate, but indications as of now do not
indicate a swing in cane area or fall in sugar production
32
Thank You