Sugar stocks turn sweet

Almost across the board, all sugar stocks are up in the green. Dhampur Sugar Mills, Balramour Chini, Ugar Sugar, Triveni Engg, Mawana Sugar, KCP Sugar, Avadh Sugar, Uttam Sugar, Dalmia Bharat Sugar, Bajaj Hindusthan, Sakthi Sugars are all doing well.

Despite sugar glut situation in the domestic markets why have the stocks bounced back today?

“Brazil crop is seen lower. Domestic prices are seen rising. Crushing in Maharashtra closed  and in UPwill close in next one week.” That in short is the reason as explained by Mr.Tulsian for the sugar stocks buzzing today.

As per Unica, the Brazilain sugar industry group, nine mills in the country may not process sugar cane in 2018-19 due to financial problems, joining a group of about 80 that have stopped production since 2008.

Record output in India and Thailand is driving the global market to the biggest ever glut this season, with prospects of another surplus next year. Sugar mills in India are also selling sugar much below the costs with money owed to farmers going to around Rs.200 billion. Govt has allocated subsidy of Rs.15.4 billion as part of cane payments to enable mills to clear their debts.

Govt has also allowed export of white sugar while allowing them to import equivalent quantity without paying import tax within two years from Oct’19. Govt has also asked mills to export a total of 2 mtpa under the mandatory export quota program.

Thanks to the recently announced 55 rupees ($0.82) for every tonne of cane sold to the mills by growers subsidy, the domestic prices have outpaced supply.

Crushing in Maharashtra is over with all 187 sugar mills announcing closure. With production crossing 107 lakh tonnes, the 2017-18 season has seen the highest production of sugar in the state.

Meanwhile, mills are considering whether to start the next season in October, as the state is likely to see a bumper cane crop over 10.7 lakh hectares of land. For a few months, mills are planning to produce only raw sugar, which has better export potential than refined white sugar. This in turn will boost domestic sugar prices.

Some 95 sugar mills in UP have also stated that they are reluctant to resume crushing next season.