• India’s mills should produce between 30-30.5m tonnes of sugar this season, down from our original expectation of 31.5m tonnes.
  • The mills have diverted more sucrose to ethanol production than we’d expected.
  • In December to March, Indian ethanol blending in gasoline reached a record level of 7.2%.

 

Uttar Pradesh: Sugar Production Down as Ethanol Diversion Increases

  • Uttar Pradesh has produced 9.4m tonnes of sugar so far this season, down 350k tonnes year on year (YoY).
  • The mills have diverted more sucrose towards ethanol to hit the state’s 1.3b litre production target, up 300m litres YoY.
  • All in all, we think Uttar Pradesh will produce 11m tonnes of sugar this season, down 1.5m tonnes from last season’s record.

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Maharashtra: Sugar Production Crosses 10M Mark 

  • Maharashtra has produced 10.05m tonnes of sugar so far this season, up 4.2m tonnes YoY.
  • Only 75 of its 188 mills are still crushing whereas, last year, just 28 of its 146 mills remained active.
  • We think Maharashtra will produce 10.5m tonnes in total, up 4.3m tonnes YoY, yet still 250k tonnes shy of the 2018/19 record.

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  • It seems unlikely that Maharashtra will top the 2018/19 record this season, as it strives to hit its 1.1b litre ethanol production target, having produced just 279m litres last season.

Karnataka: Almost to the End With One Mill Left 

  • Karnataka has produced 4.1m tonnes of sugar so far this season, up 800k tonnes YoY.
  • With just 1 mill still operational, we think Karnataka will produce 4.1m tonnes of sugar in total, up 800k tonnes year-on-year, and just 100k tonnes off the 2018/19 record.

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  • Karnataka has also increased cane acreage, agricultural and sucrose yields following last year’s well-timed monsoon.
  • However, its ethanol production must jump this year, from 206 to 379m litres, if it’s to hit its target set by the Government.
  • This means it too will need to divert more cane and molasses towards ethanol, falling 100k tonnes short of the 4.3m tonne record set in 2018/19.

 

A Recap of Our Indian Sugar Production Estimates for 2020/21  

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Poor Sugar Sales As COVID Hits Consumptions 

  • Cane dues to sugarcane farmers have crossed USD 3 billion (INR 292 billion); 19% higher YoY. 
  • Mills are lobbying for the Government to increase the minimum selling price from INR 31/kg to INR 33/KG to increase mills’ revenue and liquidity.

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  • Sales have been affected as COVID has hit sugar consumption.
  • This has impacted the mills liquidity, despite the Government’s 2.2m tonnes of domestic sales quota issuance this month, up 400k YoY
    • Sugar mills need domestic sales quota in order to sell sugar domestically,
  • Sugar consumption has been hit again by a renewed surge in COVID cases.
  • Consumption in hotels and restaurants has taken a hit, as social activities such as wedding banquets and celebrations were trimmed down to a maximum cap of 200 guests in open-air venues and 100 guests for enclosed areas.
  • The mills’ sugar sales have been also been hit, weakening their liquidity and ability to pay sugarcane farmers.

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Fiona Tan

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