Sugar Cycles: 7-8 years of losses followed by 2-3 years of super gains!

Let’s try to understand the practicality of this news. Currently 50% (approx) of the ethanol demand is met by sugar industry. If they stop procuring all of this (Ethanol made from B molasses, C molasses and sugarcane juice) they won’t be able to meet targets of even 15% blending forget 20% blending of 2025 which anyways will 1000 crore litres (approx) from sugarcane. Lets think of the feedstocks demand in this case. All the feedstocks apart maize is already in short supply. Price rise of wheat and rice which already has happened will happen more and create inflation.

Let’s come to the news government will procure only ethanol made from C molasses. It will result in 20% less ethanol production to the sugar mill compared to B molasses and sugarcane juice. Anyway, given the current sugar price scenario sugar mills were anyway going to use the C molasses way. Even if they stop in the long run the fundamental impact of the sugarmills will be optionality of their 20% revenues of the % of the ethanol produced will be lost. So net net not a major impact in the long run. Currently there is no impact at all.

Currently given the feed stock shortage and price rise in other commodities achieving this target of blending is already ambitious (without changing the dynamics of supply of all rice, sugar and wheat) If they want to keep a balance they wont practically stop sourcing of B molasses and Sugarcane Juice. I think its just to create a hype and this will help in keeping sugar prices in control and even hoarders will be cautious in hoarding sugar.