Sugar Prices Lift as India Commits to Boosting Ethanol Yield

On Thursday, sugar prices soared after India reiterated plans to divert more sugarcane to expand ethanol blending with gasoline.

US sugar futures for July delivery climbed by 2.57% to ¢19.59 per pound on June 13, creating a three-day rally. Moreover, market analysts anticipate a 1.25% jump to ¢19.83 a pound in the coming trading day.

Tightening global supply drove the sweet commodity to hit a one-month high, increasing the monthly gain to 7.05%. Previously, the International Sugar Organization (ISO) hiked its 2023/24 global demand estimate by 1.00% from 180.40 MMT to 182.2 MMT.

Furthermore, the London-based intergovernmental entity raised its 2023/24 global sugar deficit forecast by 328.16% from 689,000 MT to 2.95 MMT. The ISO noted production issues in India, the world’s second-largest exporter, as a primary driver for the revision.

In contrast, downward pressure came from weakness in the Brazilian real, with the BRL/US forex pair shedding 2.15% this month. According to trade experts, a decline in local currency prompts producers to sell abroad instead of domestically.

Unica also reported that Brazil produced 42.43 MMT of sugar for the current crop year as of April 19, marking a 25.70% year-over-year increase. Additionally, Brazil’s crop agency, Conab, expects total output for the current crop year to expand by 1.30% YoY to a record 46.29 MMT.

India Extends Sugar Shipment Restrictions Indefinitely

Until further notice, India said it would restrict total sugar exports for the 2023/24 crop season to 6.10 MMT. Initially, the sweetener producer intended to lift the limits at the start of the 2024/25 season on November 01.

Adverse weather forced Indian farmers to end their sugarcane crush early, leading to a 1.60% YoY decline in October-April output. In addition, 516 mills shut down at the end of April, 12.17% above the 460 that closed in the same period last year.

According to commodity specialists, India’s sugar supply will continue to tighten as the country strives to boost its energy self-sufficiency. Lastly, industry watchers expect New Delhi to grant more incentives to urge more sugarcane processors to produce ethanol.