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Indian sugar output hopes wane, as ethanol rivalry grows

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It looks like ethanol is catching on in India too.

 

Czarnikow trimmed to 30-30.5m tonnes its forecast for India’s sugar output this season, from an initial estimate of 31.5m tonnes.

 

And it blamed not the impact of weather on cane production, the usual suspect in Indian (and broader Asian) sugar production downgrades, but the growing enthusiasm among cane mills for making producing ethanol instead.

 

“The mills have diverted more sucrose to ethanol production than we’d expected,” Czarnikow said, in a move echoing that of StoneX, which last week cut its forecast for Indian sugar output by 1.1m tonnes to 31.0m tonnes, also thanks largely to increased competition from the biofuel.

 

Indian blending of ethanol into gasoline reached a record 7.2% in the December-to-March period.

 

‘Renewed surge in Covid’

And just as well, given signs that India’s famously large sugar demand is flagging.

 

“Sugar consumption has been hit again by a renewed surge in Covid cases,” Czarnikow said.

 

“Consumption in hotels and restaurants has taken a hit, as social activities such as wedding banquets and celebrations were trimmed down to a maximum cap of 200 guests in open-air venues and 100 guests for enclosed areas.”

 

More export support?

Indeed, there is talk that India’s government is considering lifting the country’s export ambitions to helped drain supplies.

 

The International Sugar Organization on Thursday reported “rumours that the government might extend the [export] target figure by 2m tonnes, to 8m tonnes in total”.

 

Not that this would come for free to the government, requiring as the ISO noted, a “commensurate increase in the support budget” – a controversial package which makes Indian exports competitive on international markets.

 

Still, for the government to sit on its hands comes with a cost too, given that the softness in the domestic market is slowing payments by mills to cane farmers, an important lobby.

 

“Cane dues to sugarcane farmers have crossed $3bn (292bn rupees), 19% higher year on year, Czarnikow said.

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