India’s Ethanol Policy Shift Reshapes Global Sugar Market Outlook (Sep 2025)

The international sugar market is at a pivotal juncture as India, one of the world’s largest producers, significantly expands millers’ freedom to divert sugarcane into ethanol for the 2025–26 season. This regulatory move is designed to curb looming oversupply, bolster the nation’s ethanol blending ambitions, and offer producers operational flexibility in response to both domestic and export pressures. Notably, India’s sugar output is projected to jump 18% to 34.9 million tones, further intensifying supply-side dynamics. With the government’s recent update enabling mills to select from cane juice, syrup, and B- or C-heavy molasses for ethanol—with review mechanisms to safeguard edible sugar availability—the strategic balance between fuel and food markets takes center stage.

Ethanol procurement rates remain robust, giving mills economic incentives to divert sugar, while industry voices push for higher export quotas and substantial ethanol production to stabilize prices. On the global stage, weather volatility, robust inventories in key origins, and shifting import patterns underscore a market defined by transition and opportunity.

📈 Prices: Latest Sugar Market Snapshot

Origin	ICUMSA	Grain Size (mm)	Purity	Location	Price (EUR/kg)	Prev. Price	Date	Sentiment
GB	32	0.30–0.60	–	Norfolk	0.57	0.57	2025-09-01	Stable
GB	32	0.45–0.60	–	Norfolk	0.57	0.57	2025-09-01	Stable
GB	45	0.21–0.43	–	Norfolk	0.57	0.57	2025-09-01	Stable
UA	45	0.40–1.00	–	Vinnytsia Oblast	0.58	0.58	2025-09-01	Stable
CZ	45	0.40–1.00	–	Vyškov	0.55	0.55	2025-09-01	Stable
DE	45	0.40–0.65	–	Berlin	0.69	0.69	2025-09-01	Neutral
CZ	45	0.50–0.75	–	Vyškov	0.58	0.59	2025-09-01	Softening

🌍 Supply & Demand Drivers

• India Policy: New Indian policy gives mills open choice of feedstock for ethanol, facilitating the diversion of up to 11 million tonnes of sugar, responding to an 18% jump in forecast output.
• Ethanol Incentives: Strong ethanol procurement rates encourage diversion, offering relief to domestic and global oversupply.
• Exports vs. Domestic Use: Industry demands at least 2 million tonnes for export and 5 million tonnes for ethanol diversion to balance India’s surplus.
• Global Consumption: Major importers (e.g. Indonesia, Middle East) show firm demand, but robust Brazil output and EU stocks temper upside pricing.
• Speculation: Market positioning remains cautious with attention toward India’s actual ethanol diversion volumes and looming export decisions.

📊 Fundamentals & Comparative Data

Country	2025/26 Output (Mt)	Change YoY	Ending Stocks (Mt)	YoY Comments
India	34.9	+18%	~6.5	Large increase & ethanol flexibility
Brazil	44.0	Steady	~5.0	Good cane conditions, record crush
EU	16.3	+2%	~2.8	Recovery in France, mixed elsewhere
Thailand	11.2	Flat	~1.4	Weather limiting upside
Indonesia	2.5	Flat	Very low	Heavy importer, liquidity risk

🌦 Weather Outlook for Key Regions

• India: Adequate monsoon rains so far; potential for above-average yields, but late-season flooding risk persists in UP and Maharashtra.
• Brazil: Optimal crush weather in Center-South, with some dryness forecast for October—potential for later ripening but little immediate threat.
• EU: France facing moderate to severe dryness in northern beet regions; Germany and Poland stable. Watch for harvest delays.
• Thailand: Mixed outlook; precipitation within normal bands but at risk if late monsoon underperforms.

🕹 Market Drivers & Strategic Insights

• India’s export and ethanol policy is the linchpin for Q4 2025. Expect any export quota increases or ethanol blend mandates to spark volatility.
• Brazilian production remains a stabilizer: record cane availability offsets some India-side risk.
• The market shows a neutral-to-soft tone amid anticipation of actual Indian ethanol diversion; price upside is capped by global surplus unless weather disrupts further output.
• Monitor trade flows to Indonesia and Middle East for signs of tightening availability in Q4–Q1 2026.

⚡️ Trading Outlook & Recommendations

• Sellers: Consider opportunistic forward sales for Q4–Q1 while global fundamentals remain soft. Watch for Indian government updates that may move the market.
• Buyers: Use current stable/soft prices to procure stocks, especially for delivered Europe; monitor currency volatility for importers.
• Hedgers: Maintain covered positions with a neutral bias; options strategies favored ahead of Indian policy events.

📆 3-Day Regional Price Forecast

Exchange/Country	Instrument	Current Price (EUR/kg)	3-day Forecast (EUR/kg)	Trend
Europe (ICE Europe)	White Sugar #5	0.62	0.61–0.62	Soft/Flat
UK (FCA Norfolk)	Sugar gran., ICUMSA 32/45	0.57	0.56–0.57	Stable
Central Europe (CZ, DE, LT)	Sugar gran., ICUMSA 45	0.55–0.69	0.55–0.68	Flat/Soft