Sugar stocks surge on report India’s output may fall 7% YoY

Shares of sugar companies rose sharply on December 6 after news agency Reuters reported that India’s output of the sweetner was likely to see a surprise 7 percent fall for the marketing year beginning October 1.

Sugar output is likely to fall due to low cane yield in the country’s largest sugar-producing state Maharashtra, where on average farmers are facing a 15 percent decline in yield and in some areas as much as a 35 percent drop, the Reuters report said.

Adverse weather conditions were to blame for the surprise drop in cane yields as farmers blamed intense heat and strong monsoons earlier this year.

Maharashtra, which accounts for a third of the country’s production, will likely see its output drop to 11.7 million tonnes in the new sugar year starting October 1 as against expectations of record produce of 13.8 million tonnes earlier.

The sharp drop will likely weigh on the country’s sugar exports and push up global prices. India is the world’s second-largest exporter of sugar.

Reuters report noted that in the case of a production fall, the government may curtail exports until there are sufficient supplies to meet the domestic demand of 27.5 million tonnes.At 10.05 am, shares of Ponni Sugars, Avadh Sugar, Simbhaoli Sugars, Shree Renuka Sugars and Balrampur Chini Mills were up 1-12 percent on the National Stock Exchange.