Sugar prices are rising amid concerns over lower production in India and tight supplies in global markets, while a change in ethanol procurement rules has brought sugar mills into focus. With output expected to fall this season and domestic demand remaining firm, the supply outlook could remain tight in the coming months.
Oil marketing companies (OMCs), including Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL), have invited bids for 1,100 crore litres of ethanol for the 2026-27 season.
However, the tender excludes ethanol made from sugarcane juice, sugar syrup and B-heavy molasses. Instead, the OMCs are seeking supplies from C-heavy molasses, maize, broken rice and surplus rice from the Food Corporation of India (FCI), among other eligible feedstocks.
The decision comes at a time when India’s sugar production is expected to decline due to unfavourable weather conditions and lower crop yields. The move could also affect how sugar mills allocate their sugarcane between sugar production and ethanol, depending on the applicable rules and economics.
Sugar output may fall to 27-29.5 million tonnes
India’s sugar production is estimated at 27-29.5 million tonnes in the current season, compared with around 31 million tonnes last year. Domestic demand is expected to be around 28.5-29 million tonnes, leaving a relatively narrow gap between production and consumption.
Below-normal monsoon conditions have raised concerns over yields, particularly in Maharashtra and Karnataka, two of India’s major sugar-producing states. Estimates suggest that sugar output across the two states could decline by around 14-19%.
While production prospects are better in Madhya Pradesh and some northern states, the expected decline in key producing regions has added to concerns over overall availability.
Sugar prices have already moved higher in recent months, with crop concerns supporting the market. Festival-season demand has also added to the pressure on domestic supplies.
India has achieved 20% ethanol blending in petrol, with grain-based feedstocks accounting for a significant share of supplies.
Maize has contributed around 42% of ethanol supplies in recent years, while surplus rice accounted for 22% and damaged food grains for 7%. Together, these sources made up around 71% of the feedstock mix, compared with approximately 25% from sugarcane-based sources.
Sugar mills have started crushing earlier than usual this season. Operations began around October 15, nearly 20-25 days ahead of the normal schedule, which typically starts in November after Diwali.
Around 40-50 mills have already begun crushing, potentially bringing fresh sugar supplies into the market in October itself. Early crushing could help ease near-term supply concerns, although the extent of relief will depend on cane availability, recovery rates and production volumes.
The government has also taken steps to contain the rise in sugar prices. These include an emergency import allocation of 1 lakh tonnes and stock limits that remain in place until November 30.
These measures could improve availability and limit sharp price increases. However, the market’s direction will continue to depend on the pace of fresh supplies and the balance between production and consumption.
Global sugar markets face production risks
Supply concerns are not limited to India. Raw sugar prices have climbed to four-year highs, while white sugar prices have reached levels last seen a couple of years ago.
Weather-related risks have affected production prospects in Brazil, Thailand and the European Union. Thailand’s sugar output is expected to decline by around 17%, while production in the European Union could fall by approximately 19%.
Lower output in these major producing regions could keep global sugar prices supported if supply remains tight.
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Sugar prices rise on lower output concerns; ethanol policy puts mills in focus