Dhampur Sugar, Dalmia Sugar, Shree Renuka, Balrampur Chini: Sugar shares surge up to 8%; here is why

Shares of sugar manufacturers such as Dhampur Sugar, Dalmia Sugar, Shree Renuka, Balrampur Chini, EID Parry, Bajaj Hindusthan, Avadh Sugar, Dwarikesh Sugar, Sakthi Sugars and Vishwaraj Sugar surged in range of 2% and 8% after sugar prices in global markets surged to their highest level in 52 weeks on Tuesday, October 6.

Raw sugar futures surged to $20.81 per lot on mounting supply concerns and low output from major sugar producers like Brazil, India and Thailand. The emerging El Nino weather pattern is raising concerns about sugarcane production, analysts noted.

Brazil is witnessing unusually high rainfall in Central and Southern Brazil disrupting cane harvesting and crushing while India experienced weak monsoon season leading to shortfall in sugarcane crop.

Earlier this week, government further tightened the stock holding limit for sugar dealers to 1,000 quintals, effective from October 15 to November 30, in a bid to ensure adequate supplies of the sweetener at reasonable prices during the festival season.

With the new sugar season beginning October 1, the Centre said it was strengthening measures to ensure availability of sugar to consumers at reasonable prices during the festive period.

"By restricting the quantity and storage period of sugar, the government aims to facilitate the orderly movement of sugar through the supply chain and ensure its continuous availability to consumers at reasonable prices," the ministry said in a statement.

In August, citing a tight supply year, the government had imposed a nationwide stock holding limit on dealers of 4,000 quintals, applicable from August 1 to November 30, along with a maximum holding period of 30 days from the date of receipt. The limit was later tightened to 2,000 quintals from September 15.

According to the ministry, average retail sugar prices have fallen 15% from their August peak and are expected to decline further as lower prices in the supply chain are realised. Ex-mill prices have dropped by around 28% and have remained stable for the past three weeks.

The government reiterated that mills, dealers, wholesalers and other market participants must ensure uninterrupted movement of sugar and prevent hoarding and speculation. Wholesalers and retailers have also been urged to "immediately pass on" the benefits of the sharp fall in ex-mill prices to consumers.