Sugar Export Scenario in India
A Stagnant Outlook as of April 2, 2025
–Dilip Patil
India, the worldтАЩs second-largest sugar producer, is grappling with a sluggish sugar export market in the 2024-25 season (October 2024 to September 2025). The government permitted an export quota of 10 lakh tonnes (1 million metric tons) in January 2025 to offload surplus stocks and stabilize domestic prices.
However, as of now, only about 4 lakh tonnes (400,000 metric tons) have been traded, reflecting a significant slowdown in export activity. This stagnation is driven by a confluence of domestic and global factors, resulting in financial losses for both exporters and sugar millers, compounded by macroeconomic trends such as falling crude oil prices and a weakening US dollar.
Current Export Status
Out of the allocated 10 lakh tonne quota, just 40% (4 lakh tonnes) has been exported, primarily to neighboring countries like Sri Lanka, Bangladesh, Nepal, and parts of Eastern Africa. The pace of export deals has decelerated sharply, with industry sources noting that shipments have virtually come to a standstill. This is a stark contrast to previous years when India exported an average of 6.8 million tons annually between 2018 and 2023, peaking at 11.1 million tonnes in the 2021-22 season. The current seasonтАЩs limited quota and slow uptake underscore a cautious government approach amid production concerns and a challenging global market.
Losses for Exporters
Exporters are facing mounting losses due to several interconnected factors:
- Fall in Sugar Futures Market: Global sugar prices have weakened, with NY world sugar #11 futures dropping in recent months. This decline mirrors a broader softening of commodity prices, reducing the profitability of export deals. For instance, export sugar prices have fallen from тВ╣45,000 per tonne to тВ╣41,000-42,000 per tonne, eroding margins.
- Rupee Appreciation Against the Dollar: The Indian rupee has strengthened relative to the US dollar, with the USD index falling to 103.10 (down 0.68% as of April 2, 2025). A stronger rupee reduces the value of export earnings in local currency terms, making overseas sales less lucrative for Indian exporters.
- Recession-Like Demand Slump: A global recession-like situation has dampened demand for sugar. Foreign buyers, particularly in price-sensitive markets, are scaling back purchases as economic uncertainty looms, further stalling export momentum.
- Fear of an Export Ban: Reduced sugar production in India, projected at 25.4 million tonnes for 2024-25 (down from 32 million tonnes the previous year), has fueled speculation of a potential export ban. Foreign buyers are hesitant to commit to deals, fearing policy reversals similar to the complete export restriction imposed in the 2023-24 season.
Losses for Sugar Millers
Sugar millers, who rely on exports to clear surplus stocks and improve cash flow, are also bearing the brunt of this downturn:
- Fear of Ban Due to Reduced Production: The anticipated drop in sugar output, driven by erratic monsoons in key states like Maharashtra and Karnataka, has heightened fears of a ban. This uncertainty has slowed export negotiations, leaving millers with unsold stocks.
- Decline in Export Sugar Prices: The fall in export prices from тВ╣45,000 to тВ╣41,000-42,000 per tonne has squeezed millersтАЩ margins. Domestic prices, averaging тВ╣36,500-39,000 per tonne, remain below production costs (estimated at тВ╣41,000-42,000 per tonne), making exports a critical outletтАФyet one that is currently unprofitable.
- Stagnation Despite Earnest Money Deposits (EMD): Even after paying EMD to secure export quotas, millers report no movement in deals. This ties up capital and exacerbates financial strain, as stocks remain in warehouses with no buyers in sight.
Global Macroeconomic Influences
The interplay of crude oil prices, currency movements, and BrazilтАЩs sugar-ethanol dynamics is further complicating IndiaтАЩs export scenario:
- WTI Crude Oil Price: $69.81, down 2.65% (-$1.90).
- Brent Crude Oil Price: $73.14, down 2.41% (-$1.81).
- USD Index: 103.10, down 0.68% (-0.71).
The significant decline in global crude oil prices signals a bearish outlook for ethanol, a key alternative use for sugarcane in both India and Brazil. In Brazil, the worldтАЩs top sugar producer, falling crude oil prices reduce ethanolтАЩs profitability, prompting mills to shift production toward sugar.
On April 2, 2025, WTI and Brent prices reflect this downward trend, which typically depresses ethanol prices and boosts sugar output in Brazil. With Brazilian mills prioritizing sugar over ethanol (as seen in 2024-25 projections of 43.1 million tonnes), global sugar supply is expected to rise, exerting further downward pressure on prices. This discourages international buyers from purchasing Indian sugar, as cheaper Brazilian supplies loom on the horizon.
Implications for IndiaтАЩs Sugar Sector
The combination of a stronger rupee, falling global sugar prices, and BrazilтАЩs increased sugar production creates a perfect storm for Indian exporters and millers. The 4 lakh tonnes traded so far fall well short of the 10 lakh tonne quota, and industry experts doubt India will exceed 7 lakh tonnes by September 2025. This sluggish pace contrasts with earlier optimism from millers, who in October 2024 urged the government to allow 20 lakh tonnes of exports to capitalize on an anticipated surplus.
The governmentтАЩs focus on ethanol blending (targeting 20% by 2025-26) adds another layer of complexity. With sugarcane increasingly diverted to ethanolтАФup to 1.7 million tonnes this seasonтАФsugar availability for export is constrained. Yet, the drop in crude oil prices undermines ethanolтАЩs economic viability, potentially forcing a rethink of this strategy if global sugar prices remain weak.
Outlook
IndiaтАЩs sugar export scenario remains bleak as of April 2, 2025. The interplay of reduced domestic production, falling export prices, rupee appreciation, and a global recession-like environment has stalled trade.
BrazilтАЩs shift toward sugar production, driven by low crude oil prices, further dims prospects for Indian exporters by flooding the market with cheaper alternatives. Unless global demand rebounds or India adjusts its policy (e.g., increasing the minimum selling price or easing export restrictions), the remaining 6 lakh tonnes of the quota may go unutilized, leaving millers and exporters in a precarious financial position. The sectorтАЩs hopes now hinge on a potential recovery in sugar futures or a shift in government prioritiesтАФboth of which seem distant amid current trends.
The Author Dilip Patil is Managing Director of Karmyogi Ankushrao Tope Samarth Co-op Sugar Factory, Ambad -Jalna.┬а(Maharashtra)
