Sugar Manufacturing Process

Transcription

1 India is the largest consumer and second largest producer of sugar in the world next to Brazil. Major portions of sugarcane cultivation in India lies in the subtropical belt. U.P., Maharashtra, Karnataka, Tamil Nadu, Uttaranchal, Bihar, Punjab, Haryana are the important cane growing States in this region. Sugarcane is also grown in a few pockets in Madhya Pradesh, West Bengal, Rajasthan and Assam, but the productivity in these States is very low. Sugarcane Harvesting Transporting Sugarcane to Plants Planting of Sugarcane Cane Crushing & Juice Extraction Farms Cultivation of Land for Sugarcane Planting Packing of Sugar Sugar Manufacturing Process Evaporation - Converting Juice into Syru Boiling of Syrup - Crystallization of Sugar Grading of Sugar Drying of Sugar Centrifugal separation of Sugar Crystals & Molasses

2 Global Sugar Scenario World sugar production for the 2005/06 marketing year is forecast at million tons, raw value, up 3.3 million tons from the revised 2004/05 estimate. Consumption is forecast at million tons, up 1.7 million tons from a year earlier. Exports are forecast at 47.7 million tons, up 1.4 tons; and ending stocks are forecast at 31.5 million tons, down 3.6 million tons. Forecast increases in 2005/06 world production and trade are mainly due to higher production in India, up 4.2 million tons; Brazil, up 500,000 million tons; and China, up 700,000 tons. Brazil 20% Others 43% EU 15% Us 5% China 7% India 10% Sugarcane production depends on: Sugarcane area under cultivation and sugar yield. Profitability compared with alternate crops. Weather conditions during previous and current seasons. Rationing Payment promptness. Type or variety of seed used. Extent of ratoon crop. Soil conditions. Availability of water. Weed, pest and disease control.

3 World Sugar production ( million tones) Countries Total Africa Cuba Total Central America USA Total North America Brazil Total South America India Total Other Asia Total Asia Oceania EU World Total World Sugar consumption ( million tones) Countries Total Africa Cuba Total Central America USA Total North America Brazil Total South America India Total Other Asia Total Asia Oceania EU World Total

4 Indian Scenario India to depend on inventory in season Sugar production is expected to grow by 36% to 17.4mn tones in season 05-06, It will still fall short of our consumption estimates. This would mean that the phenomenon of inventory feeding India s consumption will continue for the third consecutive year in season This,we believe is going to put pressure on the already fast depleting inventories. This steep fall will be inspite of an expected jump in sugar production by 36% in season and by 27% in season Industry Dynamics (mn tonnes) E E Opening Stock Production Imports Total Availability Off-take for 2.Internal Consumption Export Total Closing Stock Closing Stock% 63% 62% 69% 48% 27% 20% 21% Closing Stock (Months) Indian Sugar Consumption India's sugar consumption has been growing at an annual rate of around 3-4 percent. During the 9th Five Year Plan period, the Government projected the growth rate in consumption at a compound rate of 5.6% having regard to the GDP at 7%.

5 Consumption Stats. (in 000 metric tones) Country India China Brazil USA Pakistan World Total Sugar Recovery Sugarcane material balance WATER 45% MOLASSES 5% BAGASSE 33% SUGAR LOSSES 2% PRESS MUD 4% RECOVERABLE SUGAR 11% * Chart not to scale Brazil, India and china hold the key Brazil ( 19% of global production) Sugar production in Brazil has been increasing by an average of 9% p.a over the past decade. There is tremendous scope for further increase in production specially in the center South, the major cane growing region in Brazil where sugar cane plantings have the potential to expand to twice their current area. We Believe that going forward Brazil s sugar production will be closely related to its ethanol policy. With global oil prices remaining firm, signifact amount of sugarcane diversion may happen for ethanol production, which could affect sugar production in Brazil.

6 India ( 9% of global production) India, the largest consumer of sugar is not expected to turn into big exporter as production is barely expected to meet consumption. Indian crop being highly dependent on monsoon, any disappointment on that front would turn Indian into a sugar importer and could change the dynamics of global sugar industry. China ( 6.5% of global production) China is expected to become the largest sugar importer in 2008 led by growing consumption and restricted production caused by limited area under cultivation. Consumption is expected to touch 13.5 mn tones in 2008 whereas production would remain flat as 10.5 mn tonnes. Government Policy GOI regulates & controls the rate of sugarcane supplied by farmers.10% of the production has to be sold to the GOI at a fixed price and is used for PDS (Public Distribution system). The sugar industry has been de-licensed since August GOI has decanalised export of sugar. Mandatory usage of 5% Ethanol with petrol in 9 states w.e.f Level of blending likely to be increased to 10%. Sugar Subsidies in the European Union Global perspective & impact on India The European Union has been warned by the World Trade Organisation to curb sugar exports by 22 May, 2006 after a ruling that it unfairly subsidized to the producers. In mid-2004, the WTO ruled that EU farm subsidies were unfair after complaints from Brazil, Australia and Thailand. Export refunds are foreseen to cover the difference between the cheaper world price and the higher EU price so that EU sugar can be sold at an artificial price on the world market. Export refunds account for 75% of the EU budget for sugar. EU sugar aid is distorting world market prices because surplus production enjoying production subsidies must be exported.

7 Indian Sugar Industry 398 sugar factories located across the country with highest number Located in Maharashtra and U.P Over 50% of the units have capacity of less than 2,500 TCD which is the minimum economic size India is the fourth Lowest cost sugar producer in the world after Australia, Brazil and Thailand. Annual turnover of Rs 150 Bn ( Rs Crs) Domestic sugar industry follows a 5 year cycle. India is the fourth Lowest cost sugar producer in the world after Australia, Brazil and Thailand. India s cost of Sugar production is one- fourth of that in the Europe. Comprises 7.5 % of India s rural population Can generate 4000 MW surplus eco Friendly power from bagasse. Has the potential to earn Substantial forx by exporting sugar. Can meet 10% of petrol requirement in India by the way of producing Ethanol - resulting in substantial FOREX. India adding largets sugar consumer every year. 2% of total crop area is under sugar cane cultivation ( 4.5 Million Heactares) SUGAR CONTRACT SPECIFICATION AT NCDEX Sugar (M Grade),Sugar (S Grade Kolkatta),Sugar (S Grade Vashi) Type of contract Name of commodity Ticker symbol Unit of trading Futures Contract Specifications Sugar (M grade),sugar(s grade Kolkatta basis),sugar(s grade Vashi basis) SUGARMMZR, SUGARSKOL, SUGARSVSH 10 MT =10000Kgs

8 Delivery unit Quotation/base value 10 MT Rs/Quintal Tick Size Re 1 Quantity Variation +/- 5% Delivery Center Muzaffarnagar(Sugar M),Kolkatta(Sugar S),Vashi(Sugar S) As per directions of the Forward Markets Commission from time to time, currently - Mondays through Fridays : Hours of Trading 10:00 AM to 05:00 PM Saturdays : AM to 2.00 PM The Exchange may vary the above timing with due notice. No. of active contracts Minimum 2 contracts and maximum 12 contracts running concurrently 20th day of the delivery month Due date/expiry date Position limits (Sugar M,Sugar S Kolkatta) If 20th happens to be a holiday, a Saturday or a Sunday then the due date shall be the immediately preceding trading day of the Exchange Member-wise: 50,000 MT Client-wise: 10,000 MT (This limit will not apply to bonafide hedge limit if granted by the Exchange) (Sugar S Vashi) Member-wise: Max (Rs. 20 Crores, 15% of open interest), whichever is higher Client-wise: Max (Rs. 10 Crores, 10% of open interest), whichever is higher

9 SUGAR (M 30),SUGAR (S 30), CONTRACTSPECIFICATION AT MCX SYMBOL Trading Period (Sugar M-30) SUGARM SUGARS Monday s through Saturday s Trading Session Delivery Centre (Sugar M-30) Price unit (Sugar M-30) Trading Quantity (Sugar M-30) Tick Size (Sugar M-30) Gain/Loss per Re 1 change (Sugar M- 30) Initial Margin (Sugar M-30) Monday to Friday Saturday Muzzafarnagar Vashi Muzzafarnagar 100kgs 40kg 10MT 4 MT 1 Re 10 Paise 100 4% 3% 3% 10:00 AM -5:00 PM 10:00AM- 2:00 PM Sugar Fundamentals Short term outlook: Sell Higher supply amidst weak demand has pressurised the sugar prices at the domestic markets. The recent downtrend in sugar prices is attributed to a higher sugar sales quota. The open market sugar sales quota for March is quite higher, while traders even failed to sell/lift entire February quota. The Agriculture Minster has assured the Lok Sabha that the sugar prices would not be allowed to race to Rs per kg and the release order would be increased to meet the situation.

10 Amidst such situations, sugar prices are likely to remain mostly steady with a bearish undertone in the short-term. Long term outlook : Buy The long-term scenario remained quite promising for domestic sugar industry with regular export demand amidst a firm international trend. Domestic sugar prices are likely to change its course and move northward and this bullish trend is likely to continue for atleast next 3 months. The domestic industry estimates the prices to rise by 5-7 percent over next few months. Pakistan is likely to issue a tons sugar import tender by this weekend. Pakistan has recently bought tons of sugar from Indian Sugar Exim Corporation. Moreover, with the abolition of additional excise duty on sugar, the imposition of VAT on sugar by State Governments is on the way and eventually would make sugar dearer at retail level. EU subsidy This price advantage is due to the recent metamorphosis the global sugar industry has witnessed after Australia, Brazil and Thailand successfully fought a suit against EU for subsidizing its sugar farms The withdrawal of EU sugar subsidy has pushed the global prices up.

11 Ventura Securities Limited Ventura Commodities Pvt. Ltd. Registered Office: Dhannur E, 15, Sir P.M. Road, Mumbai ; This report is neither an offer nor a solicitation to purchase or sell securities. The information and views expressed herein are believed to be reliable, but no responsibility (or liability) is accepted for errors of fact or opinion. Writers and contributors may be trading in or have positions in the securities mentioned in their articles. Neither Ventura Securities Limited nor any of the contributors accepts any liability arising out of the above information/articles. Reproduction in whole or in part without written permission is prohibited. This report is for private contribution. Wednesday, 8 th March 2006