Sugar stocks Balrampur Chini, Dhampur Sugar, Uttam Sugar Mills rally up to 11%. Here are 2 triggers

In today’s session, Balrampur Chini Mills gained over 3% to Rs 752 on the BSE, while Dhampur Sugar Mills gained 8% to Rs 200 per share. Uttam Sugar gained 11% to Rs 359 per share. Triveni Engineering shares rose 4% to Rs 306, while Eid Parry gained over 4% to Rs 831.

What’s behind the sharp rise?

1.) Festive period – India’s sugar demand usually surges from August to November as the country celebrates festivals like Ganesh Chaturthi, Dussehra and Diwali, which leads to heightened demand for sweets, biscuits and other confectionery items.

Also read: Sugar production hit by Red Rot disease, El Nino; govt taking measures: Pralhad Joshi

Last month, the government ordered dealers to hold sugar stocks for no more than 30 days in a bid to bolster supplies. However, sugar prices have risen 10% over the past month to record highs, with analysts expecting them to remain elevated for at least the next three months. Meanwhile, patchy rains and dry weather have hit sugarcane output, further supporting prices.

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2.) Supply worries – A key trigger behind the sugar price spike is the worsening supply outlook in Brazil, the world’s largest sugar producer. The country has warned of a delay in the harvest amid adverse weather conditions. Adding to uncertainty, Brazil has suspended its bi-weekly harvest and production reports, leaving investors with limited visibility on the supply situation.
The shift towards ethanol is further intensifying concerns over a potential sugar supply crunch.In June, 58% of Brazil’s cane juice was diverted towards ethanol, given that it is likely to be more profitable than sugar. Brazil has also raised its mandatory ethanol blending target to 32% in July from 30% in June, significantly higher than the 25-27% mix seen just months earlier.

Supply concerns are not limited to Brazil. Intense heatwaves and El Nino conditions across the EU and the UK have added to fears of tighter supplies, with sugar output from the region trimmed to 14.98 million tonnes. In Asia, Thailand, the world’s third-largest sugar producer, has cut its projected output by 15.6% to 9.5 million tonnes. India, the world’s second-largest sugar producer after Brazil, is also projecting lower sugar production. Authorities are physically verifying mill volumes to enforce strict hoarding limits.

Global deficit estimates are also pointing towards a tighter market. Green Pool has projected a global sugar deficit of 3.3 million tonnes, while StoneX has estimated the shortfall at 1.7 million tonnes. The International Sugar Organisation has forecast a deficit of 0.26 million tonnes.

Read more: No ethanol link, decline in sugarcane production and stockpiling driving up sugar price: Experts

With production concerns mounting across major sugar-producing regions and global benchmark prices continuing to climb, the supply outlook has emerged as the key factor driving the sharp move in sugar prices.

Government tightens sugar curbs

The government halved the stockholding limit for bulk sugar consumers to 15 days, intensifying efforts to contain record prices just as festive demand begins to build. The move announced late Wednesday was followed by an order requiring sugar mills to report sales, buyers, and price levels during August 17 to 19, as ex-mill prices surged about ₹10 a kg, or 20%, in the past four to five days.

New Delhi is tightening market scrutiny amid concerns over hoarding and an acute squeeze in supplies ahead of the August-November festive season, while assessing whether imports are needed to ease the shortage, industry executives told ET.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)