Analysis: India likely won't export sugar for years as El Nino, ethanol squeeze supply

Hero Motocorp

22/06/2026 02:30

    * El Nino threatens lowest rainfall in 11 years
    * Farmers switch from cane to less water-intensive crops
    * India expands ethanol use despite tighter cane supplies
    * Former top exporter may import amid acreage, yield
concerns

    By Rajendra Jadhav
    MUMBAI, June 22 (Reuters) - India, once the world's
second-largest sugar exporter, is expected to have little
surplus for export for at least three more seasons as El Nino
weather conditions threaten cane production and rising ethanol
demand squeezes supply.
    The twin pressures are poised to keep millions of tons of
sugar off the world market, tightening supplies for importers
across Asia, Africa and the Middle East and supporting benchmark
prices in London  LSUc1  and New York  SBc1 .
    A prolonged absence by India from export markets would
remove a key balancing supplier as weather risks and biofuel
policies reshape global sugar trade flows.
    Interviews with over a dozen trade and industry executives,
government sources and farmers show that lower cane availability
and rising ethanol demand will leave little for exports for
several years, prompting dealers at global houses to warn head
offices of shrinking opportunities in India, trade sources said.
   
    GOVERNMENT EXPECTED TO CURB EXPORTS SEASON BY SEASON
    Sugar is politically sensitive in global top consumer India,
where sweets are highly popular and many poorer households rely
on it as a cheap source of calories.
    "Supplies are already tight in India, and now El Nino is
emerging as a major risk," said Rahil Shaikh, managing director
of MEIR Commodities India, a Mumbai-based trader.
    "If rains disappoint as forecast, cane planting will suffer
and this will keep India out of the sugar export market for at
least three years, while Brazil and Thailand could also see
their crops affected by El Nino."
    Top exporter Brazil is also diverting more cane for ethanol.
Thailand, another major exporter, could also have its output hit
by El Nino-curtailed rains.
    India exported 6.8 million metric tons of sugar annually on
average in the five seasons through 2022-23 - about 10% of
global shipments. This year, after exporting around 800,000
tons, India banned shipments until September 30, the end of the
season.
    Mills need government approval to export sugar, and New
Delhi is likely to withhold export permissions each season
rather than announce a multiyear ban, government and industry
sources with knowledge of the matter said.
    Last month, a top minister in Prime Minister Narendra Modi's
government told mills to prioritise domestic availability and
not lobby for exports, the sources said on condition of
anonymity because the discussions were confidential.
    India's Department of Food, Civil Supplies and Consumer
Affairs did not respond to a request for comment on the
prospects for exports or its restrictions on exports.
    EL NINO CLOUDS CANE OUTLOOK
    El Nino conditions are forecast to weaken India's monsoon
rains this year to their lowest in 11 years.
    Below-average rains, coupled with June precipitation running
more than 40% below average, have prompted farmers to delay
planting.
    "I had planned to plant long-duration cane varieties in
June, but since everyone is talking about lower rains, I decided
to put that plan on hold," said Sambhaji Patil, who decided to
grow soybeans instead on 2 acres (0.8 hectares) in Sangli
district of the western state of Maharashtra.
    Nursery owner Suraj Chavan said demand for cane seedlings
had fallen sharply in recent weeks.
    Farmers are likely to switch to less water-intensive crops,
which could drag down cane acreage and availability in the
2027-28 season, said Prakash Naiknavare, managing director of
the National Federation of Cooperative Sugar Factories.
    Local authorities have started promoting alternative crops
such as soybeans, pigeon peas and other pulse varieties in most
sugar-growing regions and have restricted water supplies for
irrigation.
    India was expected to produce 30.95 million tons of sugar
this season, but output is now forecast at 27.9 million tons,
below annual consumption of about 28.5 million tons, according
to industry estimates.
    As a result, inventories with mills at the start of the
season on October 1 are likely to fall to about 3.5 million
tons, the lowest in more than three decades, said MEIR's Shaikh.
    At the same time, India is pushing for higher ethanol
blending with petrol and wider adoption of flex-fuel vehicles to
cut dependence on expensive imported crude.
    Ethanol demand could more than double to some 30 billion
litres (8 billion gallons) by 2039-40 from the current 12
billion to 13 billion litres as higher ethanol blending in
petrol and adoption of flex-fuel vehicles gather pace, industry
estimates suggest.    
    SUGAR IMPORTS POSSIBLE FOR FIRST TIME IN DECADE
    "The trajectory for ethanol demand is incredibly strong,"
said Samir Somaiya, chairman and managing director of Godavari
Biorefineries  GODA.NS . "The next phase of demand evolution
will be driven by the commercial rollout of flex-fuel vehicles."
    Top Indian carmaker Maruti Suzuki  MRTI.NS  this month
launched the nation's first flex-fuel passenger vehicle, while
Hero MotoCorp  HROM.NS  launched a flex-fuel motorcycle.
    India this month eliminated the production tax on petrol
blended with higher levels of ethanol and launched fuel with up
to 85% ethanol to support adoption of flex-fuel vehicles.
    Future government policies will likely support ethanol
production over sugar exports, said B.B. Thombare, managing
director of Natural Sugar in Maharashtra state.
    India could eventually be forced to import sugar if El
Nino-related weather disruptions sharply cut cane cultivation
area and output, the government sources and industry officials
said, with traders warning that supplies could tighten further
in the 2027-28 season.
    India last imported sugar in 2016-17 and 2017-18 after an El
Nino-induced drought in 2015 cut cane planting. In 2009 and
2010, India's heavy purchases helped push global prices to
nearly three times their previous levels.
    "Because of a severe El Nino and rising demand for ethanol,
not only would exports from India be wiped out, but imports into
India in the coming years could also become necessary," said
Mohan Narang, director of K.S. Commodities, a trading house in
New Delhi.

 (Reporting by Rajendra Jadhav; Editing by Mayank Bhardwaj, Tony
Munroe and William Mallard)
 ((mailto:rajendra.jadhav@thomsonreuters.com; Reuters Messaging:
x.com/Rajendra1857))