Shares of major sugar companies have experienced an impressive surge, rallying up to 17% in the last one-month. This surge in sugar stocks can be attributed to two main factors. Firstly, global and domestic sugar prices have been rising due to unseasonal rainfall in India, a poor European beat crop, and increasing demand.
Raw sugar futures in recent days rose to 25.62 cents a pound, reaching an 11-year high.
Secondly, in February, the central government had rolled-out petrol blended with 20% ethanol at select petrol pumps in 11 states and union territories.
The government of India, with the aim to enhance India’s energy security, reduce import dependency on fuel, save foreign exchange, address environmental issues, and give a boost to the domestic agriculture sector, has been promoting the Ethanol Blended Petrol (EBP) Programme. It was initially launched in 2003.
In June 2022, the country achieved the target of 10% ethanol mixed with petrol much ahead of the target of November 2022.
The India Sugar Mills Association (ISMA) trimmed its sugar production estimates to 340 lakh tonnes for the crop year spanning October 2022 to September 2023, as against 358 lakh tonnes in the 2021–22 marketing year.
The association cited unseasonal rainfall in Maharashtra, accounting for over one-third of the country’s sugar output.
In addition, sugar mills are now allocating a larger portion of sugar cane juice for the production of ethanol due to the current sugar prices being below the cost of production for mills. This shift in production has led to a decrease in sugar supply, which has resulted in a spike in sugar prices, as per media reports.
Sugar production in India, the world's second-largest sugar-producing nation after Brazil, fell 6% to 311 lakh tonnes till April 15 of the 2022–23 marketing year ending September, mainly due to lower output in Maharashtra, according to industry body ISMA.
Sugar output stood at 328.7 lakh tonnes in the corresponding period of the previous year. As per ISMA, sugar production in Uttar Pradesh rose to 96.6 lakh tonnes from October 1, 2022-April 15, 2023, compared to 94.4 lakh tonnes in the year-ago period.
Maharashtra's sugar production fell to 105 lakh tonnes from 126.5 lakh tonnes, while output in Karnataka declined to 55.3 lakh tonnes from 58 lakh tonnes.
At the same time, sugar production in Europe slid on lower beet crops derived from reduced acreage and a severe summer drought. The output is set to rise in Brazil, but the higher sugar cane supply would likely be allocated to ethanol.
The prices of crude oil have increased in the last few weeks, and the end of gasoline tax exemptions in Brazil will make biofuel blending a lot more profitable, according to Trading Economics.
Amid high sugar prices, the Indian government is unlikely to permit additional sugar exports this year as untimely rains have impacted the production in Maharashtra, said Food Secretary Sanjeev Chopra, who spoke to PTI.
The food ministry has allowed 6 million tonnes of sugar exports for the current 2022–23 marketing year. Out of which, about 4 million tonnes have been exported so far, as per the trade report.
According to media reports, the process of blending ethanol in petrol has resulted in significant foreign exchange savings for India, amounting to more than ₹20,000 crore during the ethanol supply year (ESY) of 2021–22, which spans from December 2021 to November 2022.
The public sector oil marketing companies have been able to save approximately 433.6 crore litres of petrol in ESY 2021–22.
Major sugar stocks, including Uttam Sugar Mills, Dalmia Bharat Sugar and Industries, Dwarikesh Sugar Industries, Balrampur Chini Mills, EID Parry (India), Shree Renuka Sugars, and Triveni Engineering & Industries, have experienced significant gains of between 2% and 17% in the last one-month Uttam Sugar Mills has recorded the highest gain of 16.60% among them.
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