Shares of sugar mills extended gains on March 19 to rise up to 7 percent after a significant rally in the previous trading session, which was fuelled by industry estimates of a production shortfall, a concern that has been dispelled by industry body ISMA.

Millers' association ISMA has dispelled concerns of a sugar shortage this season and said that there would be stable and sufficient availability of sugar to meet domestic demand during 2024-2025 market season (October-September).

Notwithstanding, shares of Uttam Sugar Mills were trading over 7 percent higher at Rs 247 per share. Balrampur Chini Mills shares jumped over 6 percent to trade 52 percent higher than its 52-week low. Shree Renuka Sugars shares meanwhile jumped nearly 5 percent.

Other sugar stocks which recorded strong gains included Dalmia Bharat (over 5 percent up), Sakthi Sugars (over 5 percent up), Bajaj Hindusthan Sugar (nearly 5 percent up), Mawana Sugars (nearly 5 percent up), Dwarikesh Sugar Industries (nearly 5 percent up), Rana Sugars (nearly 4 percent up), Dhampur Sugar Mills (over 3 percent up), EID Parry India (nearly 3 percent up) and more.

The rise in the sugar mill share prices comes as industry estimates indicate that sugar output in two of the world's largest producers - India and Brazil - may fall short of expectations. In January, the Indian Sugar and Bio-energy Manufacturers Association (ISMA) had lowered its sugar production forecast for the 2024-2025 season to 26.4 million metric tonne (MMT) from its previous estimate of 27.27 MMT.

Fear of a tighter supply and a sustained demand may lead to higher sugar prices, benefitting sugar mills. After hitting a three-week high on March 18, the most actively traded raw sugar contract in New York has continued to extend gains.

Additionally, the International Sugar Organization (ISO) has raised its forecast of a global sugar deficit for 2024-25 season to -4.88 MMT from earlier estimate of -2.51 MMT in November. This tightening of supply is in sharp contrast to a surplus of 1.31 MMT recorded during 2023-24 season.

The prolonged dry weather in Brazil has further added to the supply concerns. Conab, Brazil's government crop forecasting agency, had cut its sugar production estimate for the 2024-25 season to 44 MMT, down from its earlier projection of 46 MMT, citing lower sugarcane yields due to drought and excessive heat.

In a recent report, ISMA affirmed stable and sufficient availability of sugar across the contry in the ongoing financial year 2024-25 season, and projected positive industry outlook for the 2025-26 season. "With a projected closing stock of 54 lac tons by September 30, 2025, ISMA projects that India's sugar reserves will remain more than adequate to meet domestic demand," it said.

"ISMA remains optimistic about the upcoming 2025-26 season, backed by favourable weather conditions and improved planting. The 2024 monsoon has enhanced cane planting, particularly in Maharashtra and Karnataka, setting the stage for an on-time start of the crushing season in October 2025," it further said.

The industry body further said that the Indian government’s decision to allow the export of 10 lac tons of sugar for the current season has significantly benefitted the industry. "This policy has helped balance domestic sugar stocks while providing financial stability to millers. The timely exports have allowed mills to make prompt cane payments, benefiting 5.5 crore farmers and their families," ISMA said.

The industry body added that the 2024 monsoon has enhanced cane planting, especially in Maharashtra and Karnataka.