Shares of sugar-producing companies climbed up to 20 per cent on Tuesday, March 18 after sugar futures registered sharp gains amid fears of a supply shortage. The most actively traded raw sugar contract in New York jumped by 3.7 per cent to its three-week high before pulling back slightly.
Leading the gains was Uttam Sugar Mills, which skyrocketed 20 per cent to Rs 230.90 on the NSE. It was followed by Gayatri Sugars’ 11.34 per cent gain, Dalmia Bharat Sugar’s 8.06 per cent gain, and Avadh Sugar & Energy’s 7.31 per cent gain.
Major stocks like Balrampur Chini Mills, Triveni Engineering, EID Parry, Shree Renuka Sugars, Dwarikesh Sugar Industries and Dhampur Sugar Mills also gained in the range of 2.5 to 6 per cent.
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Supply Shortage Concerns
Global sugar production is facing severe pressure as Brazil and India – the top two largest sugar-producing countries – grapple with lower yields.
India: According to a Bloomberg report, industry estimates pointed to lower-than-expected output in India, after which concerns emerged over the country’s capacity to keep exports going.
India's sugar production has shrunk by 16.13 per cent to 23.71 million metric tons (MMT) so far in the ongoing 2024-25 season, as per a PTI report. The Indian Sugar and Bio-Energy Manufacturers Association (ISMA), a representative body of sugar producers, revised India’s 2024-25 sugar production forecast down to 26.4 MMT, citing lower sugar cane yields and early closure of mills. This was a reduction from January’s estimate of 27.27 MMT.
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Meanwhile, the National Federation of Cooperative Sugar Factories (NFCSF) has projected the country's total sugar output to be lower at 25.9 MMT in the ongoing 2024-25 season, against 31.9 MMT in the previous season.
Brazil: Outside India, drought and extreme heat last year led to fires in São Paulo, Brazil's top sugar-producing state, causing an estimated loss of 5 MMT of sugarcane. The Center-South region of the country saw sugar production fall by 5.6 per cent year-on-year (YoY) to 39.822 MMT as of February, according to Unica.
Reflecting this decline, Brazil’s crop agency Conab revised Brazil’s 2024-25 production estimate down to 44 MMT from an earlier 46 MMT, citing lower yields.
