Maharashtra, India’s top state and the one-third sugar production stream, has dried out by yearly 14% to only 9 million metric tons, the lowest level in four years. The planted sugar canes are receiving 59% less rainfall than usual, which is the driest climate in centuries, according to Reuters.
According to the India weather department, this September rainfall could limit the damage caused by last month’s dry spell. The low agricultural production has forced the Indian government to ban mills from exporting sugar for the first time in seven years, starting from next month onward.
India is already in a food inflation crisis and the depressing low sugar may kick the inflation higher not just India alone but globally as well as ICE Sugar NO.11 price is skyrocketing to the decade high. The current sugar future price is around $26 per 112,000 pounds contract which doubles the usual price.
Meanwhile, the second top sugar producer, Thailand also facing dry climate as well but didn’t ban sugar export yet. Many Thai sugar producer stocks price might benefit from this development afterward, as most of them currently double the lowest price during covid lockdown, while their peaks earlier this year almost triple the lowest point.
As of Wednesday, Khon Kaen Sugar Industry PCL (SET: KSL) is trading at THB 3.08, this year peak at THB 3.78 and 4.50 in 2021.
Kaset Thai International Sugar Cooperation PCL (SET: KTIS) is trading at THB 4.00, which is still below this year’s peak of THB 4.42 and 6.9 in 2021.
Buriram Sugar PCL (SET: BRR) is trading at THB 5.90, compared to this year’s high at THB 8.65 per share.
Khonburi Sugar Industry PCL (SET: KBS) is trading at THB 6.25, while this year’s peak was at THB 8.3 per share.