Sugar Stocks were trading lower for the third day in a row after the government announced a cap on sugar exports at 10 million tonnes contracted for, with no exports between June 1-October 31, 2022 (except under restrictive conditions), has led to a big negative shift in the industry perspective. Sugar stocks have seen panic selling and share prices have crashed in the three days.
Top Gainers & Losers
Uttam Sugar Mills(up 1.83%), Dharani Sugars & Chemicals(up 0.87%), Sakthi Sugars(up 0.64%), Kothari Sugars & Chemicals(up 0.59%), EID Parry(up 0.57%), BAJAJHIND(up 0.37%), Ponni Sugars(Erode)(up 0.28%) and Rana Sugars(up 0.18%) were among the top gainers. Simbhaoli Sugars(down 4.97%), Ugar Sugar Works(down 4.96%), Mawana Sugars(down 4.73%), Dhampur Sugar Mills(down 4.03%), Dalmia Bharat Sugar & Industries(down 3.28%), AVADHSUGAR(down 3.00%), MAGADHSUGAR(down 2.99%), Vishwaraj Sugar Industries(down 1.39%) and Dwarikesh Sugar Industries(down 1.26%) were among the top losers.
Why Are Sugar Stocks Under Pressure?
According to the Ministry of Commerce and Industry, sugar exports have been placed under ‘restricted’ category with effect from 1 June 2022, limiting sugar exports to 10 million tonnes till the end of the season on 31 October 2022. The government said sugar mills and traders who have specific permissions from the government will only be able to export sugar (including raw, refined and white sugar) till 31 October 2022 or until further orders. Additionally, the restriction is not applicable for exports to the European Union (EU) and the United States under CXL and TRQ (Tariff-Rate Quota) quota.
Initially, India planned to cap sugar exports at 8 million tonnes but the government later decided to allow mills to sell some more sugar after production estimates were revised upwards. Since 2010-11, India has consistently produced surplus sugar, comfortably exceeding the domestic requirements, the government has claimed.
India’s sugar exports had increased to $4.6 billion (about Rs 35,000 crore) in 2021-22 from $1.17 billion (about Rs 9,000 crore) in 2013-14, the commerce ministry had said in April. India exported sugar to 121 countries across the globe, it said.
A consistently higher inflationary environment has created a sense of panic amongst traders and with reports of export restrictions on sugar has led to a sharp fall in sugar stocks, experts said.
Raj Vyas, Portfolio Manager, Teji Mandi, said: “Sugar stocks are in focus after the Indian government put sugar export in a restrictive category from June 1, 2022 onwards. This is seen as a precautionary measure to safeguard the country’s own food supplies. So, what the statement from the government means is that now sugar mills will need to take permission from the government to export sugar. As in any case exports were not expected to be happening beyond 10 Million Tons and the fact that the government is comfortable even at an inventory level of 6 Million Tons by end of September 2022 is positive. Hence we believe that it is a good step by the union government and we should not see any earnings impact because it is just the potential export restrictions and there is no ban on exports.”
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