As the world's largest consumer of sugar, on December 7, India's official Ministry of Food and Consumer Affairs in charge of the sugar industry, a government document officially announced:
The government document, which essentially means that in order to ensure adequate supply of sugar in India's domestic market and to stabilize its domestic sugar prices, directs sugar mills to ban the production of ethanol from cane juice or molasses in the 2023/24 season year with immediate effect.
Indian Sugar Manufacturers Association (Indian Sugar Mills Association) in November estimates, 2023/24 season year India's sugar production will fall 8%, only 33.7 million tons, India's sugar production is expected to decline has pushed Indian sugar prices to nearly 14 years to the highest level.
Indian authorities are working on a proposal to restrict the use of sugarcane juice for ethanol production during the current season, according to people familiar with the matter who spoke to the media. A final decision has yet to be made and plans are still subject to change.
Sugar cane can be used to produce both ethanol and sugar, and restricting the use of sugar cane for ethanol production would mean that more sugar cane would be put into sugar production.
The above proposal, if approved, will help ease the sugar shortage in India. Affected by the news, the New York futures market sugar prices plunged 7.9% on Wednesday, the biggest drop in 10 months.
Michael McDougall, managing director of commodities trader Paragon Global Markets, said restricting ethanol production would prevent Indian sugar stocks from falling further.
People familiar with the matter also said that while restricting ethanol production may help India curb food inflation, the impact may be limited. This is because some ethanol has already been sold in tenders earlier this year and therefore needs to be produced.
India is the world's largest consumer of sugar and also the world's second largest producer of sugar.
Insufficient rainfall this year has restricted the growth of India's sugarcane crop, further affecting the country's sugar production. In October this year, the Indian authorities issued an announcement that the export restriction on sugar will be extended beyond October 31 this year until further notice.
Due to the surge in commodity prices after the Russia-Ukraine conflict, India began to impose total sugar export restrictions in June last year, and then in October last year, the export restrictions were extended for one year, until October 31 this year.
The Indian Sugar Mills Association (ISMA) has previously said that India's sugar production is expected to fall by 8% in the 2023-2024 season, which began on October 1, due to lower rainfall in the main cane-producing regions.
Following the ban, an official said that an additional 1.04 million tons of grade B molasses would be allowed for ethanol production under existing contracts, in addition to ethanol production that would continue to be allowed for grade C molasses, a sugarcane byproduct that contains little to no sugar.
