Insight Focus
The Indian government has suspended sugar exports for the rest of 2025/26. This follows worse-than-expected sugar production; forecasts of El Nino in 2026 presumably don’t help. A further poor year of sucrose production may leave the government needing to choose between making sugar or ethanol.
Indian Government Suspends Sugar Exports
Last week the Indian government announced it will suspend sugar exports for the rest of this crop year (i.e. until September 30, 2026). The move follows the rapid end to the 2025/26 cane crush that was hit by early cane flowering in Maharashtra and Karnataka, as well as widespread diversion of sugarcane to jaggery.
There are numerous factors behind the government’s decision.
The final sugar production number for 2025/26 is likely to be just under 28 million tonnes, which is similar consumption. This follows deficit production last year and, as a result, India is drawing down stocks.
El Niño and prospects for a poor monsoon will add to the government’s concerns. The Indian Meteorological Department’s latest forecasts indicate rainfall in the upcoming monsoon will be 8% below normal. The government will be keen to reduce the impact on food price inflation.
Our view is that a poor monsoon will impact the 2027/28 crop more than it will the 2026/27 one. In western and southern India, very good monsoons in 2024 and 2025 have boosted reservoir levels and will enable farmers to irrigate their sugarcane to make up for poor rainfall this year. But a poor monsoon this year could lead to farmers reducing cane plantings for 2027/28 in anticipation of drier conditions in the future.
However, we doubt the government would want to take the risk of sugar shortages. Let’s not forget that India’s major festival seasons in August and October/November occur before the next cane crush fully begins, and when sugar stocks will be at their tightest.
Furthermore, the government will want to prioritise ethanol production over sugar exports. India is one of the world’s largest importers of crude oil and natural gas, and the impact of the conflict in the Persian Gulf on energy security, inflation and the economy are particularly acute.
In response to the crisis, India is seriously looking at ways to better utilise its substantial ethanol production capacity to reduce dependence on imported energy. The measures include increasing ethanol’s blend in petrol, introducing flex-fuel vehicles, promoting using ethanol in cooking stoves and exploring blending ethanol in diesel.
Exports are Unlikely to Recover in 2026/27
Tighter sugar supplies have supported Indian sugar prices at close to INR 38,000/tonne (ex-mill, Maharashtra) since February. Firmer world prices and, importantly, a weakening Indian Rupee have improved export margins. There’d even been a pick-up in shipments and export contracts since April.
The government had initially permitted Indian mills to export a total of 2 million tonnes in 2025/26. By mid-April, 600,000 tonnes of sugar had been shipped and the industry reports that around another 200,000 tonnes were contracted. Some of this sugar can still be shipped under the export ban if loading, port arrival, or customs handover was completed before the government notification.
We therefore now see total exports being limited to 700-800,000 tonnes in 2026/27.
Positive margins on white sugar exports to regional markets (East Africa and South Asia) in theory could mean that shipments could pick up if the export ban isn’t extended into 2026/27. However, we feel this is unlikely given the tight market balance and the government’s focus on controlling food and energy inflation.
Even if the government did permit exports, we’d expect domestic market tightness to keep volumes small. This is because if exports threatened to create domestic sugar shortages, local prices would increase to match export returns and, in turn, make exports unattractive.
Meanwhile, the weak Indian Rupee means the No.11 price required to make Indian raw sugar exports viable has fallen to 16.5c/lb. However, mills would still lose around 2 c/lb on raw sugar exports. We therefore don’t see India exporting raw sugar in the foreseeable future.
Incentives to Divert Sucrose to Ethanol
Although the bulk of 2025/26 ethanol volumes have already been finalised, the attractiveness of ethanol vs. sugar remains an important issue to follow for 2026/27. This is particularly so given both the government and the sugar industry’s rapidly deepening focus on expanding ethanol production.
However, as things stand, firm domestic sugar prices mean the government will need to increase ethanol prices if mills are to divert more sucrose to produce ethanol rather than sugar.
This is particularly so in Northern India, where sugar prices are higher than in Maharashtra. The price of ethanol relative to sugar may have to rise much more than today’s levels to encourage more diversion to ethanol in this part of the country.
Appendix
Our analysis considers the returns that mills earn from producing ethanol at the expense of sugar. 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 (OMCs), which is summarised below:
Proportion of Sugar to Ethanol:
