Sugar stocks Balrampur Chini, Triveni Engineering, Dhampur Sugar and others rally up to 7%. Here’s why

Sugar stocks, such as Balrampur Chini Mills, Dhampur Sugar Mills, and Triveni Engineering, experienced a surge of up to 7% after raw sugar prices reached a one-year high of 16.6 cents per pound. White sugar prices also reached their highest level in 15 months. In India, sugar prices jumped nearly 10% over the past month due to concerns over crop prospects in key producing regions.

The rally was fueled by a combination of factors, including a worsening supply outlook in Brazil, the world's largest sugar producer, as the country faced adverse weather conditions and suspended its bi-weekly harvest and production reports. Additionally, a shift towards ethanol production in Brazil made investors more concerned about a potential sugar supply crunch.

Supply issues extended beyond Brazil, with heatwaves and El Niño conditions in the EU and the UK further tightening sugar supplies. Asian producers like Thailand, the world's third-largest sugar producer, also reduced their output projections. Global deficit estimates indicated a tighter market, with estimates ranging from 0.26 million tonnes to 3.3 million tonnes.

The International Sugar Organisation projected a deficit of 0.26 million tonnes. With production concerns growing and global benchmark prices continuing to rise, the supply outlook emerged as the primary driver behind the sharp increase in sugar prices. India, the world's second-largest sugar exporter, is expected to have little surplus for export for at least three more seasons due to El Niño weather conditions and rising ethanol demand, which would tighten supplies for importers in Asia, Africa, and the Middle East and support benchmark prices in London and New York.