Sugar prices at Rs 25/kg by June: Balrampur Chini

Vivek Saraogi, Managing Director of Balrampur Chini, expects sugar prices to remain firm in the near term. He sees prices of the commodity to hover around Rs 24-25 per kg by May-June. "Industry volumes may go up to 18 million tonne by next year. Production estimates have almost scaled down to 14.2 million tonne."

To stop India from becoming a perennial importer, Saraogi suggests, farmers should paid next year as well.

Exclusive interview with Vivek Saraogi on CNBC-TV18.

Q: We have been hearing some scary numbers every two months—production estimates keep getting scaled down by 2 million tonne each time. But is it really 14 million tonne?

A: Yes, the official figure now is almost I think 14.2 million tonne.

Q: So what is the real figure likely to be?

A: Yes, it is likely to be around 14.2-14.3 million tonne because the season has almost drawn to a close. There is a lot of diversion to gur and khansari, which are alternate sweeteners. Therefore, sugar production can be pegged at these levels now for sure. Now there won’t be any variation.

Q: What does that mean for prices? Would that mean that this type of a poor crop would lead to a significant hardening of prices?

A: If you assume that the domestic consumption is where it is, we are looking at some kind of revival in production even next year. So, the prices should remain strong.

Q: What does that mean in terms of real prices? How much of an increase have you already seen and how much of an improvement do you think we can see?

A: If you look at Uttar Pradesh, the cost of production of mills is not below Rs 22.50. So, if you want to revive cane and stop India from being a perennial importer you’ve got to pay the farmer next year also. If you want to pay the farmer and you want to pay him higher, you’ve got to live with the cost plus price.

Having said that and having sold sugar in the first six months of our financial year, which is October to March, I think, prices, even if they move up to ex-mill levels of Rs 24-25, should be extremely acceptable, because at an average, you will get this level only.

Q: What exactly is happening with the global markets situation? Where are you seeing raw sugar quoting at per tonne in terms of global rates?

A: Raw sugar is not only dependent on India. No doubt, India will, I feel, play a considerably important role in the raw sugar prices as we move ahead. We will need raw sugar next year and people will start calling for that and having it in their godowns before the season begins. Therefore, raw sugar physically should start moving into India, which should improve raw sugar prices. There is some feeling that Brazil crop is very high—I don’t think that should happen because you have a lot of ethanol-only facilities in Brazil. So, I see global markets as well as local markets trended up.

Q: You said that next year would be better but not a whole lot better. On this base of 14 million, what do you think we can achieve next year—16 million to 18 million—more or less?

A: Reasonable expectation would be 18 million.

Q: What do you expect in terms of policy, after the central elections, because this time the outcome is a little uncertain? Do you see sugar policy being influenced considerably by which faction comes into power because that would be quite material for you as well?

A: I personally don’t feel that it is going to be change of fortunes for sugar, with a change in government. However, I do feel whichever government comes in, since they would have five-years in hand, would look at a whole lot of policies in a composite manner be it decontrol, linking sugar price to sugar cane price which is our demand, we are there in court for all this also. So, I do see some kind of a wholesome policy coming in, hopefully.

Q: This Rs 24-25 price would get reflected in which quarter, for you specifically?

A: We are not there yet. So, I hope, May-June.

source: moneycontrol