The National Federation of Cooperative Sugar Factories Limited (NFCSF), the apex body of cooperative sugar mills in India, has asked its members to focus on the production and export of raw sugar in the upcoming sugar season.
In a recent letter to cooperative sugar mills, NFCSF MD, Prakash Naiknavare said, it is advisable for sugar mills to produce raw sugar in the coming season, enter forward contracts with exporters and go for spot contracts to reap the benefits of the sugar market scenario worldwide.
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“Various market reports suggest that due to erratic weather conditions in Brazil, sugar production is expected to fall down. As a result, there will be a drop in supplies of sugar from Brazil between November 2021 andApril 2022, which provides the opportunity for us to export raw sugar in the aforesaid months,” Naiknavare said in a letter to the mills.
He added that the latest discussions with the major export houses confirm that they are going for forward contracts with sugar mills for the export of raw sugar for the deliveries in December and January at a price range of ₹3,240-3,280/ quintal on a free-on-board (FOB) basis.
The NFCSF believes that if the sugar mills are able to produce raw sugar at the beginning of the crushing season, then the mills can export above their monthly sugar quota for the domestic sale, which would be helpful in improving their cash liquidity.
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The cost of production to produce raw sugar is less by up to ₹200/ quintal in comparison to the production of white sugar, though it can vary from plant to plant depending upon the operational efficiency of the mills.
“Saving in finance cost would help in reducing the interest burden of the sugar mills. Indian sugar mills are now facing an acute shortage of space for managing their sugar inventory. The production of raw sugar for export purposes will provide relief to the sugar mills to a certain extent,” said Naiknavare.
The NFCSF has stated that the advice on raw sugar is based on the current and anticipated market.