India's sugar squeeze threatens its biggest season for sweets

India’s sugar market is under pressure as the diversion of sugarcane to ethanol production coincides with a weak harvest and tightening global supplies, prompting concerns over availability and price stability. Analysts have pointed to the shift of cane toward ethanol as a factor behind the current shortfall, noting that mills traditionally earmarked roughly 10 % of their output for ethanol use to help balance prices during periods of surplus. The government’s push for E20 fuel—petrol blended with 20 % ethanol, now the standard at pumps nationwide—has arrived at a time when sugar output is low, intensifying the squeeze, experts say. Officials dispute the extent to which ethanol policy is responsible. They state that the proportion of cane allocated to ethanol has dropped from 12 % in the 2022‑23 season to about 9 % in 2025‑26, attributing the price rise instead to weak production, hoarding and tighter global supplies. Some industry figures echo that view. Deepak Ballani of the Indian Sugar Mills Association (ISMA), which represents the mills that produce about half of the country’s sugar, said that current stocks and monthly release quotas are adequate. He argued that speculation and hoarding, rather than a genuine shortage, are driving prices upward. To curb hoarding, authorities have imposed a ceiling of 400 tonnes on the amount of sugar that traders and wholesalers may hold for three months. Suryavanshi, however, rejects that explanation. He noted that similar stock limits have been applied in the past without preventing price increases, and that prices have continued to climb after the most recent restrictions were announced. In his view, this signals a real supply constraint. India’s decision to import sugar arrives as worldwide supplies tighten. The El Niño phenomenon has reduced rainfall in Thailand, while excessive rain has disrupted cane harvesting in Brazil, the world’s largest sugar producer, where mills are also diverting more cane to ethanol. Heatwaves have damaged Europe’s sugar‑beet crop, with France forecasting its worst harvest in four years. According to U.S. government forecasters, global sugar production is expected to fall to 184.9 million tonnes this season, down from a record 186.1 million tonnes the previous year. Market reaction has been swift. London white‑sugar futures reached $541 a tonne in mid‑August, the highest level since April 2025, and New York raw‑sugar futures rose 4 % on the day India announced its import plans. Looking ahead, some analysts suggest that higher prices could incentivize mills to reduce ethanol diversion, improving sugar availability next year. “At existing sugar prices, it simply doesn't make economic sense for mills to divert cane feedstock to ethanol, so India's sugar outlook should be rather rosy going forward,” Chaturvedi said. He added that the episode offers a broader takeaway: “But the bigger lesson from this year's squeeze, he added, is clear: it is simply a 'warning that going forward, we need to be a lot more cautious in estimating our sugar harvest numbers'.”