Summary
The India Monthly Sugar Market Update for September 2024 offers a detailed analysis of India’s sugar and ethanol industries, focusing on domestic quotas, imports, exports, and monsoon forecasts. It highlights the critical balance between sugar availability, consumption requirements, and the diversion of sugar for the ethanol-blending programme (EPB). The math suggests that unless sucrose production for the 2024/25 season exceeds or matches the 34.2 MMT produced in 2023/24, there will be no room for exports. While the consensus estimate for sucrose production is 33 MMT, MEIR forecasts a higher figure of 34.7 MMT. Despite this, MEIR does not expect sugar exports to be permitted before February or March 2025, when a more concrete assessment of production can be made. The report also discusses the current perspectives on MSP, export policies, and ethanol prices for the 2024/25 season, but emphasizes that the likelihood of significant sugar exports remains uncertain until early 2025.
A key issue in the sugar industry is the revision of the MSP. The industry has been advocating for an increase in MSP, especially as the sugarcane price has risen by 24% since the last MSP revision in February 2019, when it was fixed at INR 31,000/MT (USD 369/MT). Currently, ISMA is pushing for an increase to INR 39,000/MT (USD 464/MT), a demand that has been scaled down from the earlier request of INR 41,660/MT (USD 496/MT).
In terms of domestic consumption, MEIR estimates 30 MMT for the 2024/25 season, compared to 29.4 MMT in 2023/24. In an effort to stabilize domestic sugar prices and curb cross-border sugar smuggling, the Indian government allocated a reduced monthly sugar quota of 2.35 MMT in September 2024, which is a 150,000 MT decrease from the previous year.
The ethanol sector saw the Oil Marketing Companies (OMCs) securing 5.27 billion liters of ethanol by August 2024, with the sugar sector contributing 43.87% and the grain sector 56.13%, achieving a 13.59% blending rate. For the 2024/25 ethanol supply year, 9.8 billion liters are required, and OMCs have issued a tender for 9.16 billion liters. The tender implies that 4.5 to 5 billion liters will come from sugarcane, with 5 MMT of sucrose yielding 3.5 billion liters, an additional 1 billion from C-heavy molasses (CHM), and 4.5 to 5 billion liters from grains, including 1 billion liters from rice. Corn ethanol production is expected to rise significantly, from 2.2 billion liters in 2024 to between 3.5 and 4 billion liters. MEIR expects the tender to be fully subscribed.
On the import-export front, major refiners like Parry and Renuka have imported Brazilian raw sugar and exported refined sugar to markets like Sudan, Somalia, and Libya. By September 2024, Indian refineries had imported 3.5 MMT of Brazilian sugar and exported 3.08 MMT of refined sugar.
Monsoon reports indicate that India received 108% of its Long Period Average (LPA) rainfall, with above-normal precipitation across most regions, benefitting sugarcane-growing areas in Karnataka and Maharashtra. The Indian Meteorological Department (IMD) forecasts above-normal rainfall for southern India in the post-monsoon season, with the potential emergence of a La Niña event later in the year. Overall, the monsoon season has supported the industry’s initial estimates, and MEIR remains confident in its projection of 34.7 MMT sucrose production for the 2024/25 season. Additionally, the planting of 18-month sugarcane in Central India is in full swing, indicating the potential for a bumper crop in the 2025/26 season.
India Domestic Sugar Monthly Quota
- Oct’24 Quota: The Govt allocated a monthly sugar quota of 2.55 mmt i.e. 0.35 mmt or 12.1% lower YoY.
- MEIR Estimates: We are estimating 30mmt domestic consumption for 24/25 season vs 29.4mmt in 23/24.
- Sept’24 Quota: For Sept’24, the Govt allocated a sugar quota of 2.35 mmt.
- The total cumulative domestic sugar quota for the season 2023/24 (Oct’23 to Sept’24) is 29.2 mmt vs 27.9mmt in 22/23 season.
- The domestic quotas in the season 2023/24 has seen an overall increase of 4.7%. It is important to note that, while the allocation for October 2024 has been flagged as lower than last year, the increase across these quarterly periods highlights a balance between domestic demand and the goal of curbing unauthorized cross-border trade.
India Ethanol Update
As of August 31, 2024, the total available quantity of ethanol, which includes both contracted and allocated amounts, is 7.16 billion liters. Out of this, 5.27 billion liters have been received, resulting in an overall receipt percentage of 73.6%.
For sugar-based feedstock, the contracted quantity (LOI) is 2.83 billion liters, with a receipt quantity of 2.31 billion liters, giving a receipt percentage of 81.6%. This indicates that sugar-based feedstock has a relatively lower receipt percentage when compared to grain-based feedstock. The receipt of 2.31 billion liters from the contracted 2.83 billion liters results in a receipt percentage of 81.6%.
In terms of grain-based feedstock, the contracted quantity (LOI) stands at 4.33 billion liters. Out of this, 2.96 billion liters have been received, with a receipt percentage of 68.3%. Although the grain-based feedstock has a higher contracted quantity of 4.33 billion liters, only 2.96 billion liters have been received, indicating certain challenges in the supply chain.
MEIR-MAREX Ethanol Update
India Import Export Update
Parry Refinery has imported 855k metric tons of Brazilian raw sugar and exported 670k metric tons of refined sugar, while Renuka imported 1.64 million metric tons of Brazilian raw sugar and exported 1.56K metric tons of refined sugar.
Sudan remains the top export destination for both refiners, receiving 583K metric tons, followed by Somalia with 406K metric tons, Libya with 317K metric tons, Tanzania with 291K metric tons and Djibouti with 262K metric tons of Raws.
In total, imported 3.5 million metric tons of Brazilian raw sugar and exported 3.08 mmt as on 10th Sept.
Wilmar supplied 1.62 million metric tons Raws to Renuka and 148K metric tons to Parry, while Raizen have supplied around 555k to Shri Dutt and Godavari collectively. Alvean supplied 281K to Parry’s.
MEIR-MAREX Import Export Update
Summary Report: Salient Features of the India Monsoon 2024
Overall Rainfall: India received 108% of its Long Period Average (LPA), indicating an above-normal monsoon as forecasted by IMD.
Regional Rainfall Distribution:
Northwest India: 107% of LPA
Central India: 119% of LPA
South Peninsula: 114% of LPA
Monsoon core zone by IMD (rain-fed agriculture):
122% of LPA
Monsoon Timeline:
Onset in Kerala: 30th May (2 days early)
Covered entire country: 2nd July (6 days early)
Withdrawal began: 23rd September (6 days delayed)
Overall, 2024 monsoon has helped us to keep our initial estimates unchanged with good rains in post monsoon season as well.
We are sticking with our numbers at 34.7mmt sucrose for 24/25 season and The planting of 18 month cane in Central India has been in full swing which can give bumper crop 25/26 season.
Current Market Perspectives on MSP, Exports, and Ethanol for 2024/ 25
1. Rumors Surrounding MSP and Exports
There is ongoing speculation, particularly regarding the Minimum Support Price (MSP) and the possibility of sugar exports.
In our view, it's still early to make a definitive call on exports. Any potential exports would likely be driven by political compulsion rather than market forces at this stage.
Supply and Demand: The situation remains tight, with some experts suggesting a deficit of around 300,000 hectares in Maharashtra. This translates to a projected sugar production of approximately 32 million metric tons (MMT), though ISMA estimates are slightly higher at 33.3 MMT.
We are closely monitoring developments from political quarters and will provide updates as the situation evolves.
2. Impact of Rice Exports on Market
Recent permission to reopen rice exports has led to a 7% increase in domestic prices. This development is expected to influence the availability and pricing of rice for ethanol production.
3. ISMA Conference Insights on Sugar Exports
During the ISMA conference, strong lobbying for exports was observed from industry leaders. This lobbying continued even after the conference when officials were personally engaged in discussions.
In our assessment, no political pressure will influence export decisions. The decision will be based on production numbers once the government is confident in those figures. The Secretary emphasized the need for higher production than the previous year before any decision on exports is made, likely around February 2024.
4. Ethanol Production Outlook
The government has issued a 9.16 billion liter ethanol tender, implying that 4.5 to 5 billion liters will come from sugar sources.
A breakdown of ethanol sources:
Sugar production: Around 5 MMT of sucrose will yield 3.5 billion liters of ethanol.
Corn and Grains: Expected to contribute about 4.5 to 5 billion liters, with corn contributing 3.5 to 4 billion liters (a significant increase from last year's 2.2 billion liters). Rice: Approximately 1 billion liters.
This outlook reduces the likelihood of sugar exports unless there is a significant increase in output over the previous year.
5. Strategic Focus on SCJ and BHM
Mills are expected to maximize Sugarcane Juice (SCJ) as an input for ethanol production, particularly because it offers a 20% premium over sugar prices in Uttar Pradesh (UP) and 25% in Maharashtra.
For B-heavy molasses (BHM), the corresponding premium is 10% in UP and 15% in Maharashtra.
Given the current prices, it is expected that mills will continue to prioritize SCJ and BHM for ethanol production. There is no anticipated shift in this mix.
6. Post-Rice Notification Comments on Ethanol
MEIR shared a video discussing the possibility of sugar exports within the current buffer, suggesting exports could be feasible after February-March, depending on production numbers.
Industry chatter points to potential production being lower than ISMA’s 33.3 MMT, though the Secretary and Minister both indicated it would be higher than the previous year.
7. Rice for Ethanol Production
Distilleries are currently free to purchase rice from the open market for distillation, as the government has not issued subsidized rice from the Food Corporation of India (FCI) stocks for this purpose in the current ethanol year (Nov 2023-Oct 2024).
Although there is a limited window (15th Aug to 31st Oct) to purchase subsidized rice (2.3 MMT), distilleries lack the necessary supply orders, making this window effectively void.
Moving forward, given India’s position on the hunger index and the government's political stance, it is unlikely that subsidized rice will be used for ethanol production in 2024-25.
8. Market Channels and Corn Emphasis
Recent rice export permissions have caused domestic prices to rise sharply, making it less viable for distilleries to use rice for ethanol unless prices decline or the government increases the price for rice-based ethanol.
However, with a projected 25% increase in corn output for the 2024/25 season, it is likely that the emphasis will shift towards corn for ethanol production, further reducing reliance on rice.
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