Brazil's sugar industry stands to benefit from India's decision to expand its ethanol market, converting more of the subcontinent's otherwise exportable sugar into biofuel and shifting more global demand for the sweetener onto Brazil's shoulders.
Indian prime minister Narendra Modi announced on 5 June that ethanol would be the center of his energy and environmental plan, which will help reduce India's sugar export subsidy costs.
According to India's new 2020-25 Ethanol Blending Roadmap, the official blend target will reach E20 by 2025 with phased roll-out from 2023.
In March, the Indian government also authorized the sale of pure ethanol at filling stations.
India will require as much as 10.16bn liters (175,080 b/d) of additional ethanol a year to meet that demand, with at least 7bn l of that expected to come from cane and the rest from grains. This will curtail India's sugar production and exports, a net positive for Brazil in the medium term, said Arnaldo Correa, director of consultancy Archer.
"India's announcement is clearly a positive signal for Brazil with respect to the global sugar market," Sao Martinho's chief financial officer Felipe Vicchiato said on an earnings call with investors this week. "The effects of this decision will not be seen next year but in 24 months."
Global demand for sugar is expected to grow by 1pc a year over the next five years, Correa said. And with India's reduced sugar exports and increased global demand for biofuels, Brazil will have to increase its center-south sugar cane output to 780mn-850mn metric tons from the 605mn t harvested in the 2020-21 season and build or reopen 15-20 additional large-scale sugar and ethanol mills just to maintain its current share of the global sugar export market, he added.
Yet global sugar prices may have to rise before Brazilian cane mills begin to invest in expansion again.
Brazil's cane crop has been shrinking: planted area reached 9mn hectares between 2014 and 2017, but declined to 8.4mn ha in 2020-21, according to the government crop agency Conab.
