Sugar Prices May Remain Strong, Ethanol Margins Under Pressure: Ind-Ra
26-Mar-2026 09:50 AM
Sugar Prices May Remain Strong, Ethanol Margins Under Pressure: Ind-Ra
★ According to India Ratings, sugar prices are likely to remain firm in H1 FY27 due to lower stock levels.
★ Despite an improvement in production, total output is expected to remain below normal levels, keeping overall stocks tight.
★ Sugar production in the 2025–26 season is estimated at around 32.5 million tonnes, compared to about 29.5 million tonnes last year.
★ Exports are likely to remain significantly below the permitted 2 million tonnes, keeping domestic stocks limited.
★ Closing stocks are projected at around 5 million tonnes, which is expected to support prices.
★ Rising sugarcane costs and the absence of higher ethanol prices are likely to put pressure on sugar mill margins.
★ The ethanol sector is facing excess capacity and relatively lower demand, creating an oversupply situation.
★ As India approaches the 20% ethanol blending target, growth in ethanol demand is expected to slow.
★ Grain-based ethanol producers may benefit as corn production is at a record level and prices have declined by about 20%.
★ For ESY26, ethanol supply offers are estimated at 17.8 billion litres, while demand is only around 10.5 billion litres.
★ If policy clarity beyond the 20% blending target is not provided, the oversupply situation may continue.
★ Higher crude oil prices could encourage Brazil to divert more sugarcane toward ethanol production, which may support global sugar prices.