Healthy sugar exports to reduce stocks despite higher production
Sugar maker operating margins are expected to be between 12.7 and 13.7 percent in FY23.
Domestic sugar production is estimated to be higher at 333 lakh tonnes this season from 312 liters recorded last year after factoring in 34 liters (21 litres) of sugar sacrifices in favor of juice/molasses based ethanol heavy b.
This is 6 percent higher than the Indian Sugar Manufacturers Association’s second preliminary estimate.
However, with domestic consumption estimated at around 272 liters and exports at 75 litres, the closing stock is expected at 68 liters at the end of September against 82 liters recorded last year.
This would equate to three months of consumption, improving the balance between domestic supply and demand.
Sabyasachi Majumdar, Senior Vice President of CIFAR, said that with the current favorable international sugar achievements in light of the global balance of supply and demand and geopolitical tensions, the industry is likely to manage their closing inventory levels for the current season.
However, a higher diversion from sucrose to ethanol would support sugar achievements and increase corporate profits.
Additionally, operating margins are expected to be between 12.7 and 13.7 percent in FY23.
Despite ongoing debt-financed investment plans, a greater diversion to ethanol coupled with good export prospects would lead to lower inventory levels and a better balance sheet.
Domestic sugar prices (in UP) ranged between ₹31,800 and ₹32,500 per ton last April to July. However, prices increased to around ₹33,500 in August
Last September-October, it touched ₹35,700-₹37,000 per ton, but slipped to ₹33,600-34,200/ton in February.
Anupama Arora, vice president of ICRA, said while India had achieved encouraging levels of average blending of ethanol with gasoline at 9.6% in March, it needed rapid expansion. sufficient ethanol capacities for an adequate supply.
April 12, 2022