Mills shut up shop in Indian sugar protest
http://www.abc.net.au/news/2013-11-27/mills-shut-up-shop-in-indian-sugar-protest/5119410November 27, 2013 at 3:25 PM
Indian milling companies involved in an escalating price dispute with their growers have found a novel way to register their protest against government interference in price setting.
They've simply refused to crush the cane.
It's a move that's threatened to derail the start of harvesting of the world's second largest sugar crop.
Green Pool Commodities senior analyst Tom McNeill says the volatility of the situation in India between millers and growers intensified after company's recently reported quarterly losses.
"The likelihood is it will be resolved, but it sets up some conflict between the mills and the farmers. The farmers like additional cane prices which are set by the government and by the state and are usually higher each year.
"And now mills are simply saying the returns from the domestic market, in particular, just don't pay the way, and it's even worse on the global market.
"So some of them are just refusing to open their mills until something changes."
Sugar markets have been sharply falling in the past four weeks, with the March and May 2014 New York contracts taking the biggest hits, while contracts further out have picked up a little recently.
It's prompting some to speculate prices may have steadied, but Mr McNeill says the deep discounting of the last of the Brazilian sugar might put paid to that.
"What we're seeing now is physical premiums particularly for Centre South Brazil falling quite sharply and I guess that just adds to the woes of the Brazilian industry, in that futures prices are probably at or below their cost of production. And with a further almost one cent discount for their physical product, it takes them well below.
"They're probably lucky the end of the harvest is near and they won't have a lot of sugar left to sell at these very cheap levels."
The March contract on the New York futures has dropped slightly again overnight and is sitting at 17.3 US cents a pound.
AUDIO : http://www.abc.net.au/news/2013-11-27/tom-mcneill-explains-escalating-indian-sugar-standoff/5119656
Sign In © 2024 Green Pool Commodity Specialists All rights reserved.