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Sugar price trajectory moving upwards

ICICI Securities 21 Dec 2021


Aggressive sugar exports led by favourable global prices & sugarcane diversion towards ethanol led to a reduction in domestic sugar inventories from 14.5 million tonnes (MT) in September 2019 to 8.2 MT in September 2021. Further, sugar millers have contracted for 3.7 MT of exports in the first two months of the 2021-22 sugar season.


India is producing 6-7 MT surplus sugar almost every year. This has to be diverted towards ethanol production in the next two to three years. However, an uptick in global prices along with government’s aggressive target of ethanol blending is expected to result in a significant reduction of surplus inventories in the current sugar year itself.

 Our perspective:

In the current year, the sugar industry would be able to divert 3.4 MT of excess sugar towards ethanol and has already contracted 3.7 MT of exports. India is likely to export ~6 MT of sugar in 2021-22 season supported by firm global sugar prices (~19-21 cents /lb). With a significant reduction in Brazil’s sugar production due to drought and frost, global sugar prices are expected to remain firm in at least the next six months. All these factors would bring down Indian sugar inventories to 6.2 MT by September 2022, which is just sufficient for 2.5 months of consumption. In this anticipation, domestic sugar prices would firm up to | 37-38/kg after the peak crushing season gets over (March 2022 onwards) and is expected to remain elevated till November 2022. Ultimately, high sugar prices along with addition of new distillery capacities would boost the earnings of sugar companies in FY23.

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