Executive Summary
The India Sugar & Bioenergy Conference focused on key industry challenges, including the government's sugar export ban, the need for ethanol price increases, and a revision of the Minimum Selling Price (MSP) of sugar. India’s sugar production hovers around 30 million metric tons, while ethanol blending diverts excess sucrose, contributing to the balance between local sugar consumption and ethanol production. Speakers highlighted that the government prioritizes domestic sugar availability and ethanol production, with exports potentially driven by political considerations. Brazil, Thailand, China, and Australia also face production challenges, with global sugar market dynamics pointing toward a short-term surplus followed by a projected deficit in the 2024/25 season.
The Full Story
We attended the India Sugar & Bioenergy conference held at JW Marriott Delhi, which was organized by ISMA in collaboration with ISO. The major focus from the industry was to push for changes regarding the government's ban on sugar exports, the increase in ethanol prices, and the revision of the Minimum Selling Price (MSP) of sugar. The sugar industry believes that these three policy elements are vital for its growth, as the ethanol blending program (EBP) has structurally transformed the sector. Exports have contributed to the bottom line by evacuating excess stocks of sugar, and the MSP has supported sugar prices.
India’s sugar and ethanol production is governed by a balance between local sugar consumption and ethanol blending requirements. The government’s current priorities are to ensure sufficient sugar availability for domestic consumption, followed by diverting excess sucrose for ethanol production to meet blending targets. Over recent years, as speakers mentioned, India’s sugar production has consistently hovered around the 30 million metric tons (mt) mark, with slight variations. Ethanol production has increased as the government pushes for higher ethanol blending in fuel, in line with the E20 ethanol policy (20% ethanol blending by 2025). While excess sucrose is available to be converted to ethanol, market signals must be closely monitored. Ethanol prices may deviate from projections, influencing the economic viability of this conversion. Strong domestic sugar consumption levels require tapping into high stock levels from the 2023/24 season. India’s sugar consumption has been fairly consistent, and for the 2024/25 season, production is expected to remain steady, with ethanol blending continuing to absorb excess sucrose. The government anticipates that ethanol production can act as a buffer to support up to 34 million metric tons of gross sugar output before the system reaches its capacity. According to Greenpool, with 286 million metric tons of sugarcane crushed in the 2023/24 season, 30.8 million metric tons of gross sugar was produced, with 28.2 million metric tons net after factoring in ethanol diversion.
Various analysts from different trade houses estimate gross sugar production to be between 32 mmt and 34.5 mmt, while ethanol diversion ranges from 3 mmt to 5 mmt, with many waiting to factor in anticipated price increases. ISMA’s projection for the 2024/25 season is 33.3 mmt, including ethanol diversion. The industry is pushing for ethanol price revision, export, and MSP demands, as seen in past years. Of the 10.2 billion liters required for 20% ethanol blending, 55% will come from the sugar sector, as per the ISMA President’s speech.
India's sugar and ethanol strategy relies on effectively balancing sugar demand and ethanol production, ensuring all excess sucrose can be diverted to ethanol without disrupting domestic sugar supply. However, this approach must remain adaptable to shifts in market conditions, especially with varying ethanol prices.
Brazil:
Drought is severely affecting sugarcane yields, reducing overall output. The low quality of harvested cane is further limiting the effectiveness of new crystallization capacity, preventing the industry from maximizing its sugar production potential. Exports in the 2023/24 season managed to overcome logistical challenges that were prevalent earlier in the cycle. However, the combination of a smaller crop and higher early exports has led to a significant decrease in available tonnages for exports from the last quarter of 2024 into the First quarter of 2025.
Key Metrics for the 2024/25 Season:
- Greenpool projects cane crush at 608 million metric tons (MT) and sugar production at 39.6 million MT, with sugar exports at 31.1 million MT for 24/25
- Sucden estimates 39 mmt for 2024/25, compared to 40 mmt in March 2024 reduced by 1 mmt. For the 2025/26 season, 65% of the cane will be grown during November to April, depending on rainfall. Trade houses are estimating cane crush at 600–610 mmt, as Brazil is facing a severe drought, with potential for even lower figures of 520 mmt if no rain occurs. Most trade houses project 590 mmt with 40 mmt of sugar for the 2025/26 season, depending on the dry weather conditions.
- The outlook for Brazil’s 2025/26 sugar production season suggests a mixed scenario for cane fields. Ongoing investments in the sugar industry and a favorable age profile of cane fields are expected to support healthy production levels, but drought and fires pose challenges. La Niña patterns also add unpredictability to production outcomes.
- One key issue remains that ethanol is still not competitive in comparison to sugar production, thus limiting the growth potential of Brazil’s ethanol market. This imbalance continues to shift the focus toward maximizing sugar output over ethanol production.
Thailand and China:
For Thailand, sugar exports play a vital role in the overall industry structure. As per speakers, Thailand’s sugar production has been relatively stable, although it experienced some fluctuations over the past few years. Notably, the exports of raw sugar and white sugar have constituted a large portion of production. Thailand has historically been a significant exporter of sugar, and the 2024/25 forecast suggests that this trend will continue. A key factor that may impact Thailand’s sugar export profile is China’s evolving syrup policies. These policies can affect the types of sugar products Thailand exports, especially regarding remelt sugars used in industrial applications. Additionally, there are concerns regarding Thailand’s B-quota system for sugar exports, and whether strong bids under this quota might imply that the sugar trade is unlikely to face significant regulatory crackdowns.
In China, despite lower import needs for the 2024/25 season, stocks are expected to be below usual levels, raising concerns over domestic supply security. China’s dependence on imports has lessened, but there remains a need to closely monitor syrup import regulations, as these may impact both domestic production and Thailand's exports to China. China’s syrup import policies have been crucial in shaping its domestic sugar market, as they allow the blending of imported syrup with domestic production, which in turn impacts Thailand’s ability to export to China.
Australia:
Australia’s sugar harvest for 2024/25 faces challenges due to labor strikes and adverse weather conditions, particularly La Niña. The harvest period may extend into the risky wet season, raising concerns about meeting production targets and affecting global sugar supply.
Global Supply-Demand Outlook
The global sugar market is expected to experience a shift from a deficit to a surplus and back to a deficit in the near term. In the 2022/23 crop year, global sugar production was 184-185 million metric tons (mt), while consumption was higher at 193 million mt, resulting in a around 9 million mt deficit as per analystes. For 2023/24, production was forecasted to increase to 196-197 million mt, with Brazil leading the boost in output, while global consumption is estimated to rise to 194.8 million mt, creating a small surplus of 0.6 million mt.
However, for 2024/25, global sugar production is expected to decline to 193.2 million mt. Consumption is anticipated to increase to 197.2 million mt, leading to a projected deficit of 3.5-4 million mt as per analysts. These fluctuations highlight volatility in major sugar-producing regions like Brazil, India, and Thailand, along with shifting global trade patterns.
Key Industry Demands:
1. Flexible Sugarcane Pricing:
The industry is pushing for more flexibility in sugarcane pricing, which is currently fixed by the government. While the regulated price aims to protect farmers, mill owners argue that the system doesn't account for fluctuating sugar prices in the domestic and international markets. They seek a pricing mechanism that ties sugarcane prices to market realities and sugar mill profitability.
2. Revision of Minimum Selling Price (MSP) of Sugar:
The industry wants the government to revise the minimum selling price (MSP) of sugar to reflect increased costs of production, including rising input costs, electricity tariffs, and transportation expenses. The fixed MSP is seen as artificially low, squeezing profit margins and affecting the financial viability of sugar mills.
3. Rationalization of Ethanol Prices:
With the government setting ethanol sale prices, the industry has urged policymakers to ensure that ethanol prices are competitive and reflective of the production costs. Industry leaders argue that incentivizing ethanol production at competitive prices will help in expanding the ethanol blending program, reducing India's dependence on imported fuel, and improving mill revenue streams.
4. Removal of Monthly Sugar Supply Quotas:
The current system of monthly sugar supply quotas, which restricts the amount of sugar mills can release into the market, is seen as a barrier to optimizing inventory and cash flow management. The industry is calling for the removal or relaxation of these quotas, allowing mills to operate based on demand-supply dynamics rather than artificial supply restrictions.
5. Flexible Use of Feedstock and Raw Materials:
The government regulates the use of raw materials such as molasses and bagasse for ethanol production and other purposes. The industry is advocating for greater flexibility in using these feedstocks, enabling mills to balance sugar production with ethanol production more efficiently, depending on market demands and profitability.
6. Lifting Export Restrictions:
The industry has consistently called for the removal of the bans on sugar which fluctuate based on government policy. Export restrictions prevent Indian mills from capitalizing on favorable international prices, while import bans can limit access to cheaper raw sugar. The industry seeks more liberal trade policies, allowing them to participate more effectively in global markets and stabilize domestic prices.
As per MEIR’s view, it’s still early to anticipate sugar exports, which are likely to occur only under political compulsion. Despite expert estimates of production around 32 mmt (including ISMA’s 33.3 mmt), political considerations will likely dictate the final decision on exports.
Rice exports have opened up, causing a 7% price increase in the domestic market. Intense lobbying for sugar exports was evident at the ISMA conference, but government officials emphasized the need to prioritize domestic consumption and ethanol production before considering exports. Ethanol production will remain the second priority after domestic sugar consumption.
India’s ethanol blending targets have steadily increased, with a long-term vision to achieve 20% ethanol blending by ESY 2025-26, five years ahead of the original target plan. This rapid progress highlights the government’s commitment to reducing reliance on fossil fuels through increased ethanol content in petrol.
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