You will find that old ideas are better. 

Originally posted by basant Please do not make blanket sweeping comments. Try to justify with reasons/logic. This is in reference to the post on ICICI.

It is based on past history.

Originally posted by Ajith   Have  enough stocks of old ideas which I retain .Any new themes?This  is being done by some members on TED  for example,The emerging trend of agriculture.    In the next rally, new leaders may emerge.

In agriculture sugar is good buy. When I say sugar, it is sugar as a commodity. Sugar mill is different case. I am long on sugar future.

Here is why.
Supply side:
Sugar price went up like crazy in 2006 due to ethonol and speculation. So lot of farmers went for sugar planting after SAP was set high in India. Elsewhere too there was more planting due to better price. At the same time price of other agri was depressed so sugar plantation made sense. Sugar crop cycle from sugarcane is for 2 years and rain/weather were such that there was bumper crop everywhere. Brazil/India/Indonasia are major producers.

What has changed?
Even at low prices, this year crop will be good bcoz cycle is 2 years. Generally 2nd yr crop productivity is little less and due to lower prices some farmer cared less for crop so this production is estimated to be less than previous estimate. There won't be much surplus. But main difference is going to be next year. Tables have turned. Sugar tanked but all other agri went up substantially. And with mills not paying money in time while other crops can be sold in mkt and at higher price will be preferred. The way costs are going up, price below 11c/lb is just not sustainable.

Grain prices are going to stay high even if there is correction. So sugar has to catch up or farmers may plant different crops.

European union supports sugar farmers by subsidy but wto has ordered not to do so so production will decline there even if they are not big player, marginal production makes difference when supply is tight.

Demand side:
Two well known stories. 1. Ethanol and 2. China.

1. With oil so high and sugar so low ethanol is extremely competitive. This much difference is not sustainable in long run. Either oil has to come down substantially or ethanol(sugar) has to go up. Ethanol was competitive when sugar was just half but oil was 1/10th.

2. China's per capita consumption is <1/3 of India's. That is partly bcoz of  food that they cook. That may not change. But they eat more ice-creame/candy/soda. Their growth in consumption is 10% and going to stay like that for long. With 1.3b ppl, in long run it can make big impact.

Demand side is inelastic unless oil crashes big time. Unlikely. China story change is even more unlikely.

Supply side risks are always there. No one can expect favourable weather yoy. And as long as grains are higher sugar supply will decline.

Other than china/ethanol corn syrup/sugar are substitutes. Record corn price makes sugar sweetner attractive to users so more demand.

Ethanol from sugar is more competitive than from corn but US has 55% duty on import of ethanol to support farmers. That may change given inflation scare and oil/food prices. If/when that happ there can be huge/sudden mkt for brazil ethanol. Even if that doesn't happen Brazil can export ethanol to other countries. Other countries like India/Japan are also considering ethanol option.

 

 

Edited by wise_man - 19/Mar/2008 at 11:26pm

Hi All- Do you think it is a good time to get in TED stocks...like IDFC/Yes Bank/Axis...since we still are talking abt the indian story and are likely to see higher levels of sensex by the end of the year