Insight Focus
Domestic prices remain steady at INR 39,000/tonne. A weaker Indian Rupee has lowered the cost of Indian exports, but raw sugar export margins are still negative. Incentives to increase ethanol production also remain weak.
Maharashtra Sugar Imports/Exports
Domestic sugar prices remain steady at INR 39,000/tonne throughout the month.
The Indian Rupee has depreciated by almost 2% since the end of July to reach 88.2 INR per USD at the time of writing. As a result, Indian exports now require a No.11 price of 18.5-19c/lb to be viable, which compares to over 19c/lb last month. Nevertheless, raw sugar export margins remain negative at today’s prices as mills would almost 3c/lb below the domestic market.
Margins on exports of low quality white sugar to regional markets do however remain positive. Indian shipments benefit from regional freight premiums and, currently, a strong white premium, when supplying these markets.
The industry is heavily lobbying for sugar exports of at least 2m tonnes of sugar next season, however no formal announcement has been made yet. It will likely not be clear whether exports will be allowed until at least the end of this year.
The industries is also requesting the government to raise ethanol prices to sustain the ethanol blending’s viability given cane prices have increased again this year. However, no announcement has been made on this either.
Ethanol vs Sugar
Our view on how much sugar is diverted to ethanol is informed by the returns that mills earn from producing ethanol at the expense of sugar, as well as the competition that sugarcane-based ethanol now faces from grains-based ethanol.
Many mills/distilleries have a choice over which feedstocks they use to make sugar or ethanol based on the relative prices of ethanol paid by the oil marketing companies.
The Indian government raised prices for C-molasses by 3% for the 2024/25 season from (Rs.56.58 to Rs.57.97) to ensure that there is enough ethanol for the Ethanol Blending Program (EBP), as the 20% ethanol blending target is due this year. The government had incentivised C-molasses production to ensure that there was also enough sugar supply for domestic consumption as food security is a priority for the government.
The below chart indicates revenue generated by mills in Maharashtra (then main sugar exporting region) based on the type of feedstock used. It shows that, at current prices, there are limited incentives for mills to expand the volume of sugar they divert to ethanol.
Sugar prices are higher in Northern India compared to Maharashtra, making it even less attractive to divert sugar to ethanol.
Here are the current prices paid for ethanol by feedstock:
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