The Indian Sugar Mills Association (Isma) last week reduced its production assessment for the ongoing sugar season, 2016-17 (October to September), to 21.3 million tonnes (mt), down 9% from the earlier 23.4 mt.
“With sugarcane production coming down for two successive years, 2015-16 and 2016-17, sugar production has moved downwards from 28.3 mt in 2014-15 to 25.2 mt in 2015-16 and is further expected to touch below 23 mt in 2016-17. Subsequently, prices have firmed up and will continue to do so in the coming months if the supplies are not increased,” according to CARE Ratings.
Thus far in calendar year 2017, the sugar prices jump by 6% from Rs 38.14 per kg on December 31, 2016 to Rs 40.41 per kg on Wednesday, February 1, 2017.
The increase in sugar prices augured well for the industry during 2016. On a y-o-y basis, the sugar companies made net profits in each of the quarters during January-September 2016 backed by higher sugar prices after remaining in red in each of the seven quarters during April 2014-December 2015.
Also, operating margin of the 36 listed sugar companies remained in double-digits in each of the quarters during January-September 2016, in range of 13-23 %, it was too after a gap of seven quarters.
The expected firm trend in prices will continue to benefit the sugar industry. However, if the import duty on sugar is reduced, the prices of sugar will soften. This, in turn, will put some pressure on profits of sugar mills, said CARE Ratings in recent sugar industry update.