Insight Focus
India to allow use of all cane feedstocks to make ethanol. We have increased our forecast for ethanol diversion as a result. Exports still not allowed by government.
India has recently allowed cane mills and distilleries to use all forms of cane feedstock to make ethanol again.
Mills normally use lower-sucrose C-molasses, medium-sucrose B-molasses or cane juice. But last year the government restricted use of B-molasses and cane juice ahead of the cane crush as they were concerned about sugar output.
As a result, the Indian cane industry accumulated stocks of B-molasses and these can now be distilled.
Following this change, we’ve revised our forecast for sucrose diversion to ethanol. We’d previously assumed that the cane sector would divert 3.3m tonnes of sucrose. We now think the industry will divert 4.5m tonnes instead.
This would be the highest level of diversion we have ever seen from the cane industry, enabled by better cane acreage and yields in the coming season. We are retaining our forecast for Indian sucrose production of 37m tonnes in 2024/25. Please be aware that this is higher than the trade consensus, which seems to be closer to 34m tonnes.
The main difference in opinion is around cane acreage in Maharashtra and Karnataka. Monsoon rainfall in some districts in these states was poor in 2023. Many analysts have therefore cut their cane planting estimates in these regions.
However, we note that local reservoirs were well-supplied with water and so irrigation should have been available. Rainfall in September 2023 was also heavy, enabling late plantings. The Indian government’s own estimate of kharif cane plantings for 2023 was higher than that for 2022, so we’ve forecast higher cane availability for the 2024/25 crush. As a result of the ethanol diversion change, we now forecast Indian sugar production for 2024/25 at 32.5m tonnes.
For the time being we have not included any Indian sugar exports in our forecasts. This is partly because the government hasn’t given any indication that exports will be approved; they will want to see how sugar production develops in Q1’25 before making a decision.
At current domestic prices and FX, Indian exports require the raw sugar futures market to be above 19c/lb, a level is just about achieving today. If sugar production reaches the level that we forecast and futures prices remain at or above current levels, it’s possible India allows 1-2m tonnes of sugar exports in the middle of 2025.
