Sugar stocks jump on hope of price rise

Sugar stocks gained by up to eight per cent on Friday, in anticipation of a further increase in price in the coming months, following a forecast of lower production and the government’s reluctance on import.

The share price of Parrys Sugar jumped by nearly eight per cent to close on Friday at ~66.95, followed by a 6.8 per cent increase in the stock of Oudh Sugar Mills to ~140.30. The stocks of Dwarikesh Sugar, Dhampur Sugar and Balrampur Chini rose by 4.6 per cent, 4.3 per cent and four per cent, respectively.

However, those of Bajaj Hindusthan and Shree Renuka Sugars remained stable, rising 0.7 per cent and 0.3 per cent.

“The government has been watchful on a sugar price increase. Hence, a big price rise is unlikely this year but a ~2 a kg rise cannot be ruled out in the coming months,” said an analyst with a global stockbroking company, on request of anonymity.

Sugar prices have been rising intermittently since the beginning of the current season in October, over lower output estimates. The benchmark price of the medium (M) variety has risen by 7.3 per cent to trade currently at ~41.16 a kg at the wholesale (APMC) market in Vashi, Navi Mumbai, a slight decline after a high of ~41.55 a kg on February 13. Indian Sugar Mills Association (Isma) expects total output at 20.3 million tonnes for the 2016-17 crushing season (ending September 2017), a 19 per cent decline from the previous year’s figure at 25.1 mt. The Union food minister has questioned this but the ministry is yet to issue its authentic figure. The ministry of agriculture in its second advance estimate forecast sugarcane output at almost 310 mt for 2016-17, from 348.5 mt the previous year, a decline of 11 per cent. There was drought in the major producing states of Maharashtra, Tamil Nadu and Karnataka and the rain-fed cane crop was hit.

So, many refineries in these areas wanted import of raw sugar, rejected by the food ministry. Ram Vilas Paswan, the minister, said: “We have enough sugar available and there is no need for import.” There was 7.5 mt of carryover stock from season 2015-16 and sugar supply currently stands at 27.6 mt, substantially higher than the annual consumption at around 24 mt.