The top gainer was Rana Sugar which was up 5% in the opening trade. It was followed by Shree Renuka Sugars, The Ugar Sugar, Dwarikesh Sugar, Eid Parry, Triveni Engineering & Industries and Balrampur Chini Mills which gained between 8% and 1.4% in the opening trade.
The gains have been on the back of over 3% jump in the price of sugar in a fortnight to their highest level in six years. A Reuters report quoted traders and industry officials attributing limited rainfall in the country’s key growing regions to be the reason for this panic hinting a fall in production in the upcoming season.
The stocks are up on the hope that the margins will likely improve for sugar manufacturers if the high prices sustain.
“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, Indian prices are nearly 38% lower than the global white sugar benchmark.
Jain fears a curb on sugar exports by the government in the event of demand supply issues.
India allowed mills to export only 6.1 million metric tons of sugar during the current season to September 30, after letting them sell a record 11.1 million metric tons last season.
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