World sugar prices will rise due to Indian politics

The decision by the Indian government, the world’s second-largest producer after Brazil, is likely to push up sugar prices in the coming years. Prime Minister Narendra Modi yesterday announced a plan to divert six million tonnes
The raw material is ethanol, sugar per year (equivalent to everything exported today) to be converted into car fuel.

The benefits of this strategy, which runs until 2025, are multifaceted: ethanol produced from sugarcane will reduce air pollution, reduce India’s oil import bills, help absorb more domestic sugar and increase fuel consumption. Investment in rural Asia.

Product surplus is not enough, which will raise the price of food

But for the rest of the world, the move could be the biggest change in the sugar industry in many years and boost the bull market, says analyst portal Czapp. Amid supply shortages, prices in Brazil rose to their highest level since 2017 due to extreme weather. Further increase will increase the risks of food inflation, the costs of which are currently at record highs.

While reducing global surpluses, it would be good news for the world if India diverted sugar to produce more ethanol. However, if there is a high demand, eventually some countries, including India, will have to expand the area under sugarcane cultivation, ”said Rahil Sheikh, Managing Director, Mir Commodities India Pvt.

Sugar prices are at their highest level since 2017

To achieve its 2025 target, India needs to triple its ethanol production to almost 10 billion liters a year, said Tarun Kapoor, the country’s oil secretary. This will require an investment of $ 7,000 million and the challenge is to build the capacity needed in the shortest period of three to four years.

India’s strategy is not pioneering. In fact, the Asian country is following a similar path to Brazil, which for more than 40 years has encouraged sugarcane-based ethanol to get rid of its excess sugar, reduce its dependence on crude imports and increase energy security. Today, Brazil has the largest cars that can run on any combination of ethanol and gasoline.

India will go the same way. This will allow the production of flexible ethanol based engines Press Trust of India . The government says the use of more biofuels in transport could reduce India’s oil burden from higher oil prices and save the third-largest oil importer $ 4 billion a year.