After getting the freedom to sell sugar, millers are now keen to learn the futures game. Further, they also plan to strengthen their marketing teams and chase long-term deals with bulk consumers, such as beverage and confectionery makers.
Till recently, sugar sale was controlled by the Government through the release order mechanism, under which it decided the quantity of sugar to be sold by mills during specific periods.
Now, sugar industry bodies, the Indian Sugar Mills Association and the National Federation of Sugar Co-operative Factories, are exploring options to organise training for their members on the futures platform.
“There is a need for the co-operatives to participate in the futures market for better price discovery. We are planning to encourage mills to participate in the futures trade by organising some training in the days to come,” said Vinay Kumar, Managing Director, NFCSF.
The apex State co-operative body plans to hold consultation with the various State federations in this regard.
M. Srinivaasan, Chairman, ISMA, said: “At present, not many of our member companies have the skills to trade in futures. We are in discussions to organise programmes to get our members trained in the futures trade.”
Currently, sugar is traded on the NCDEX and MCX, but the volumes are yet to pick up on these exchanges.
Kumar said that operating in a controlled environment needed no marketing, “but now, sugar mills need marketing skills.”
He said his federation would develop a marketing strategy over the next two months to help the co-operatives adapt to the changed environment.
Even companies in the private sector are seen responding to the change in environment. “Having a marketing team is the need of the day,” said Mukesh Kumar, Executive Director of Belgaum-based Vishwaraj Sugar Industries Ltd, stating that his company proposed to put together a small team of less than 10 people.
Besides, Vishwaraj is eyeing long-term deals with bulk consumers, such as the beverage and confectionery makers among others.
Currently, only a few large sugar companies are in long-term contracts with the bulk buyers such as Pepsi, Coca-Cola, Britannia and Cadbury among others.
“We are planning give a thrust to our institutional sales by strengthening our tie-ups with bulk buyers such as Coke and Pepsi,” said B.B. Mehta, Director and Chief Executive Officer of Dalmia Bharat Sugar. The company is also in talks with other major consumers such as Dabur.
Dalmia, which currently sells about 30 per cent produce to large consumers, aims to increase its bulk sales to about 40 per cent of its sales over next year. Mehta said Dalmia was also looking to leverage the NCDEX futures trading platform and was strengthening its commodity team for effective hedging and delivery.
The over 300-odd co-operatives, which account for close to half of the sugar produced in the country, mainly sell their produce through the tendering process.
“We plan to actively participate in the tenders that the States are expected to float for their public distribution system (PDS) procurement,” Kumar added.
The Centre, which scrapped the levy mechanism, has told the States to procure directly from the mills for supplies through the PDS.