Sugar stocks turn bitter

Sugar stocks lead the losers pack on the BSE. Balrampur Chini, Dalmia Sugar, Dwarkesh Sugar, Triveni Eng, EID Parry, Dhampur Sugar, Shree Renuka; all the stocks have turned bitter today.

Like steel, the market can blame it on the Govt. With the Govt going all out to curb inflation, what with RBI Governor already factoring in another rate hike next month, after six years, for the first time, curbs on sugar exports were imposed.

To soften the sugar prices, the Govt, yesterday night, announced that sugar exports from June 1 would be allowed only through permits and fixed a maximum quantity of 10 million tonnes (mt) for this season (October-September). 

These curbs though will not be applicable on sugar being exported to the EU and the US under CXL and tariff rate quota (TRQ) as these are exported under special provision through permits.

This is more of a preventive move to ensure that closing stock of sugar at the end of sugar season (on September 30, 2022) remains 6-6.5 mt; So even after exporting 10 mt, there would be enough to suffice domestic demand for 2-3 months, given that around 2.4 mt/month is released for domestic consumption. 

Sugar mills have so far signed contracts to export 8.5 million tonnes of sugar in the current 2021/22 marketing year without government subsidies. Out of the contracted 8.5 million tonnes, mills have already dispatched around 7.1 million tonnes of the sweetener.

Unlike the markets, sugar traders are not perturbed as they feel the cap of 10 mt is quite substantial and will in fact help India sell quite a lot in the global markets.