Sugar stocks up on price rise in physical markets

Global deficit and estimates of sharp decline in production in Maharashtra weigh on cos share prices

After a free fall over the past few years, the share price of sugar companies jumped sharply in March, amid expectations of an increase in their realisations in future. The upsurge continued on Wednesday, with the share price of most sugar companies increasing up to 19 per cent. Dwarikesh Sugar recorded a 97 per cent jump in its stock this month; it closed at Rs 201.1 on Wednesday. Upper Ganges Sugar had a 95 per cent spurt in its stock price, to end at Rs 111.1 apiece on Wednesday. Upper Ganges shot up 19.3 per cent, followed by Dhampur Sugar of 15.4 per cent, Bajaj Hindusthan 9.3 per cent and Balrampur Chini 7.8 per cent. Shree Renuka Sugar recorded a 25.1 per cent jump in its stock price in March and 4.8 per cent on Wednesday, to Rs 14.60 a share.

According to sources in the know, the cane commissioner had met food ministry officials to discuss production figure. India’s sugar production will fall further to 25.6 million tonnes (mt) according to the government’s revised estimates. Last year, overall sugar production was 28.3 mt.

“The International Sugar Organisation has estimated global sugar deficit at five mt for this year. This will be the first year of deficit after several years of surplus. This has helped a rebound in global sugar prices. In India also, sugar prices have been rising steadily. So, when India wants to export sugar, its prices need to follow the global move,” said Abinash Verma, director-general, Indian Sugar Mills Association.

Sugar prices in Vashi wholesale market here have increased to Rs 3,607 a quintal, an eight per cent rise from the beginning of March. Experts expect the price to rise further in the weeks to come. Maharashtra’s sugar output in is estimated to decline to six mt in the 2016-17 crushing season from an estimated 8.5 mt in the 2015-16 season and 9.3 mt in 2013-14.

“Sowing of cane has been very low this year due to drought in most growing centres in the state. So, we estimate sugar output to decline to six mt in the next crushing season,” said Sanjiv Babar, managing director of the Maharashtra State Federation of Co-operative Sugar Factories.

This raised hopes for a surge in sugar prices and realisation of sugar mills that have been reeling under severe profit pressure.