India Low Sugar Output May Derail Move To Boost Ethanol

Refined sugar prices in the country have risen almost 70% in the current crop year that began Oct. 1 as output fell to 14.7 million metric tons (mt) compared with the record of 28.5 mt clocked in 2006 to 2007. Production next year may be lower than an industry estimate of 20 mt. In contrast, ethanol prices are fixed by the government, giving millers little scope to earn margins that they are currently enjoying on sugar. The scenario is unlikely to improve soon because the fall in output this year may deplete the country’s stocks, keeping the sweetener’s prices high and, dashing attempts by the government and oil companies to curb consumption of regular gasoline at a time when crude oil costs rise. “Even if you see a marginal improvement in production next season, sugar prices are not going to come down as the carry over stocks will be lower and millers will prefer to produce more sugar than ethanol,” said Sridhar Chandrasekhar, head of CRISIL Research, a unit of Standard & Poor’s. Of the total, the chemical industry consumes around 650 million liters, the liquor industry another 750 million liters while demand for ethanol is about 800 million liters. (July 2, 2009)