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Sugar and Ethanol Daily Report

By: StoneX Intelligence Brazil, StoneX Intelligence Brazil

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Ethanol production capacity in India tends to increase in the coming months
 
Marina Malzoni
marina.malzoni@stonex.com
Rafaela Souza
rafaela.souza@stonex.com
Nuria Brito
nuria.brito@stonex.com
Government should encourage distillation from alternative feedstock
On Wednesday (25), the sugar #11 March/22 contract operated with low volatility and closed the ICE/NY session at 18.78 c/lb, virtually unchanged from the previous day. Similarly, the #5 contract closed ICE-Europe’s session at USD 504.0/t (-0.1%). 
Currently, the Indian sugar export parity is at 20.4 c/lb and USD 448.7/t considering the domestic price of INR 33,550/t. After touching the low of 17.60 c/lb on January 10, raw sugar has been finding support in the crude oil rally and in the need to attract product from India abroad, since the commodity’s global balance is expected to operate with a deficit of 1.9 million tonnes in 2021/22 (Oct-Sept). 
Indian sugar export parity
image 27335
 Source: CommodityNetwork Traders’ Pro & ISMA. Design: StoneX. 
Indeed, Indian mills are waiting for an appreciation of international prices to increase their foreign sales. In addition to this dynamic, the market remains attentive to the prospects for the ethanol sector in the Asian country, given New Delhi’s ambitious plans to achieve a 20% blend rate of ethanol in gasoline (E20) by 2025. 
In the 2021/22 season, the local sugar sector is expected to have between 70 and 75 new plants, which would add 1.9 million m³ to Indian distillation capacity. By way of comparison, the country’s distillation potential was close to 5.2 million m³ last season, with 43.9% of the production units located in Maharashtra.
In this context, about 85% of India’s ethanol supply came from sugar during the 2020/21 crop. In order to enable its energy security, the country has also been investing in projects of plants that process other feedstock, with the potential for grain alcohol production being 2.7 million m³. 
The government has already approved projects that add 8.6 million m³ of ethanol to the country’s installed capacity from grain, and sugar mills are also expanding their operational capacities based on other feedstock, with an emphasis on corn.  The significant advance of these projects shows that the country has the potential to achieve plans to make its energy matrix more renewable.  
Furthermore, this economic scenario can also make it possible to increase Indian sugar participation in the international market over the coming years, depending on the trajectory of the ethanol sector and on incentives to produce from alternative feedstock. For the current cycle, we expect about 3.0 million tonnes of sugar to be directed to ethanol production, with the country being able to export about 6.0 million tonnes of sugar. 
Currently, oil marketing companies offer INR 52.9/liter for the biofuel produced from grain. On the other hand, the price fixated by the government for ethanol produced from molasses C, B and sugarcane juice is INR 46.7/L, INR 59.1/L and INR 63.4/L, respectively, which ensure the biofuel’s competitiveness in relation to sugar. 
Also in Asia, exports from Thailand reached around 370,000 tonnes in December 2021, representing an annual increase of 47%. Therefore, in the 2021/22 crop (Oct-Sept), 1.2 million tonnes were exported, a 36.2% growth compared to the last season. This move should grow in the coming months, with the country being able to direct around 7.1 to 7.5 million tonnes abroad by September 2022. 
 

 

 
 
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