In sweet spot! Sugar stocks rally up to 13%. Here's why
Sugar stocks jumped over 13% on the NSE on Thursday on the likelihood of a 14% fall in sugar output in Maharashtra in the 2023-24 crop year.
Dalmia Sugar was the top gainer, while Dhampur Sugar, Avadh Sugar & Energy, Balrampur Chini Mills, Rana Sugar, Shree Renuka Sugars, The Ugar Sugar, Dwarikesh Sugar, Eid Parry and Triveni Engineering & Industries rallied 6-12%.
Sugar stocks have been gaining lately on concerns over production in the wake of weak monsoon in the growing areas. Maharashtra, which is among India's top-producing states, has been at the receiving end of the monsoon witnessing the driest August in more than a century, according to industry insiders and government officials as reported by Reuters.
«Sugar mills are worried that production could fall sharply in the new season because of drought.
They are not willing to sell at lower prices,» the report said, quoting Ashok Jain, president of the Bombay Sugar Merchants Association.
Higher prices will, however, improve margins for producers such as Balrampur Chini, Dwarikesh Sugar, Shree Renuka Sugars and Dalmia Bharat Sugar, helping them make payments on time to farmers, dealers said.
Sugar output could fall by 3.3% to 31.7 million metric tons in the new season starting from October as low rainfall hits cane yields in the western state of Maharashtra and Karnataka in southern India, which together account for more than half of total Indian output, a leading trade body estimated, the report mentioned.
Although sugar prices rose to 37,760 rupees ($454.80) per metric ton on Tuesday, their highest since Oct. 2017.
