The sugar market is interestingly poised both in India and abroad. In India, with the start of the new season, the Government allowed sugar export, and there is talk about an upward revision in sugar MSP. Globally, the sugar prices are trading below export parity, making it unremunerative for domestic sugar mills to export sugar.
Speaking to ChiniMandi, Rahil Shaikh, Founder & Managing Director of MEIR Commodities, said that it’s too early to put a final sugar production figure in India for 2025-26 SS. “We are already hearing that the UP sugarcane crop is not good. Western UP is not good, but I think the central UP crop is good. In Karnataka and Maharashtra, the traditional belt is having a bad recovery. I think we would have sugar production at 34 million metric tonnes (MMT)”.
Consumption is the trump card
Shaikh feels that domestic sugar consumption would hold the key to the sugar season as it will determine the season’s balance sheet. “The whole game is one of consumption. We are getting that consumption is lower from the Association bodies. I feel that sugar consumption is not down because there is aspiration, population is rising”.
He feels India doesn’t have a big concern in the current season.
“Let’s look at the hard numbers, 4.5 MMT is the opening stock in the current season; we expect 34 MMT as the expected sugar production in 2025-26 SS. So the total sugar availability is 38.5 MMT. The domestic consumption is about 29 MMT, and ethanol diversion is expected at 3.65 MMT. And the Government has allowed sugar export of 1.5 MMT, hence we will have almost a similar opening stock to that of the previous season, which is comfortable enough. And if we have higher sugar production than 34 MMT, the Government may allow another 0.5 MMT of sugar exports,” he stated.
Export via Open General License
Shaikh said that the Government is committed to managing the surplus sugar production either through ethanol diversion or sugar exports. “Though there is no export parity at this point, but look at the European Union, they export sugar even at lower rates”.
He said that the Government should open up sugar export as per the Open General License (OGL). An Open General License (OGL) for sugar export is a government-issued permit that allows sugar mills to export a specific quantity of sugar without needing a separate license for each shipment.
He said, “Those sugar mills which are situated near the ports will export sugar. The Government has real-time export data. They can halt exports as and when they feel it’s enough. So OGL is the name of the game, as I feel that India is becoming a structural sugar exporter in the next 3 to 4 years”.
International surplus
He feels that the international sugar surplus would be in the range of 1.65 to 2 MMT, and Brazil is expected to produce about 40 MMT of sugar.
“Global sugar prices are difficult to predict. We never thought that sugar would trade below the ethanol parity, but it’s trading below that, and it’s currently around one and a half cents or two cents lower than the current ethanol parity. I think 14 cents looks to be the lower bottom of the market, and 16 and a half seems to be the top of the market in the next 6 months. When the sugar price touches 16.5 cents, then Brazil will enter the market. And if it touches 14.5 cents, then the funds will cover it back,” he concluded.
