Explained: Why Balrampur Chini, Dhampur Sugar, Dalmia Bharat & other sugar stocks are up 12% in 2 days

Sugar stocks have surged by 12% over two days, driven by a significant increase in sugar prices globally. Indian sugar prices jumped to Rs 4,400-4,800 per quintal, marking a 7-year high and an 8-10% rise in the last month. This surge comes as global sugar prices have also climbed, with US raw sugar prices surpassing $15/lb and London White Sugar hitting a 15-month high of over $500 a tonne.

Companies such as Balrampur Chini Mills, Dhampur Sugar Mills, Uttam Sugar, Triveni Engineering, and Eid Parry have all experienced gains, with Triveni Engineering showing the highest increase at 12%. The rally is primarily attributed to worsening supply forecasts in Brazil, the world's leading sugar producer, which is experiencing adverse weather conditions and has suspended its bi-weekly harvest and production reports.

Additionally, Brazil has raised its mandatory ethanol blending target to 32%, further intensifying concerns over a potential sugar supply crunch. Other regions, including the EU, the UK, and Asia, are also facing supply challenges due to heatwaves and El Nino conditions, as well as lower projected sugar outputs. Global deficit estimates for sugar are pointing towards a tighter market, with the International Sugar Organisation forecasting a deficit of 0.26 million tonnes.

With production concerns mounting and global benchmark prices rising, the supply outlook has emerged as the key factor driving the sharp move in sugar prices. India, being the world's second-largest sugar producer and exporter, is also expected to have limited surplus for export for at least three more seasons due to El Nino weather conditions and rising ethanol demand.