Few crops offer more bang for the buck in terms of energy yield than sugarcane. But those calories come at a cost. Sugar cane is also one of the world’s thirstiest crops, requiring up to five times more water per hectare than maize and up to seven times more than millet.
These stats will be a bitter pill for India’s sugarcane growers right now. An unusually strong El Niño – the natural climate cycle that typically causes dry conditions in the Asia Pacific and heavier rainfall in parts of the Americas – has led to the weakest monsoon for the subcontinent since 2015. Indian sugarcane is going thirsty.
In May, the Indian government responded by banning nearly all sugar exports from the country until 30 September. Reports in June suggested India’s withdrawal from the global sugar market may even last for a further three years as weather risks and soaring demand from the biofuels sector risk putting India in trade deficit.
How severely were global sugar prices affected?
What happens in India should matter to the world sugar market. After all, until its withdrawal from the market in May, India was the world’s second largest sugar exporter, a title since taken by Thailand. So how is all this affecting global trade in sugar and the food companies that rely on a steady supply of the white stuff?
“This isn’t like previous El Niños,” warned Jorge Alvar-Beltrán, natural resources officer at the Food and Agriculture Organization of the United Nations (FAO) in June. “The planet is much warmer today, and with conflict and food insecurity widespread, this new phase will hit hardest in places that are already vulnerable and have limited coping capacity.”
The FAO said the drought risk faced by farmers in southern Asia runs from Pakistan in the west as far east as Indonesia and the Philippines, a distance of several thousand miles. It said the last severe El Niño event in 2015 pushed up prices of key commodity crops across Asia, increasing the risk of hunger in some of the world’s most vulnerable regions.
It may therefore come as a surprise – given India’s role in sugar and the severity of the current El Niño’s – to learn that the export ban has so far had little effect on global prices. While New York and London raw sugar futures saw modest respective bumps of around 2% and 3% after the May announcement, raw sugar has been trading consistently around the ¢15/lb mark for most of the year.
The forementioned increases raw sugar futures were both modest and short-lived, for several reasons, said Doriana Milenkov, senior analyst for farm inputs and sugar at Rabobank.
“Export restrictions were anticipated and priced into the futures market, so the announcement didn’t come as a shock,” she said, adding that the motivation for ban was to send a ‘political signal’.
“On one side they wanted to protect the Indian consumer. On the other, they wanted to protect the production margins of Indian producers. Projections are for lower sugar production as a result of El Niño, so India doesn’t want to find itself in a situation where they have an internal trade deficit.”
So, the market barely flinched. By mid-June, raw sugar was again trading in New York for ¢15.3/lb. This was largely because traders had already adjusted their positions before the ban came into force, while favourable conditions and resilience in Brazil – the world’s largest exporter by some distance – continued to weigh down prices and fuel expectations of global surplus.
“India was a bullish factor for global prices, but it wasn’t strong enough to outweigh the impact of expectations for very large crops in Brazil,” explains Milenkov. These expectations were fuelled by favourable growing conditions in Brazil’s south-central sugar belt, which is responsible for around 90% of the country’s crop.
Limited reach = Limited impact
Another reason for the muted market response to India’s export ban is the relatively short reach of the country’s sugar exports. As well as being the world’s second largest producer of sugar, India is the world’s largest consumer of sugar, meaning that even before the export ban was imposed, most of what it produced stayed in India.
India is a regional, rather than global, player in the sugar market, adds Milenkov. “India is an important supplier of white sugar regionally,” she says. “Its main export markets include countries such as Bangladesh, Pakistan and Somalia, but it’s not a major supplier to Europe or the US. There is no drama, especially in Europe where stocks remain relatively high.”
High sugar stocks (and low prices) have wider repercussions for sugar cane producers, of course. “The big topic globally is the long-term balance between sugar supply, demand and alternative uses such as ethanol,” adds Milenkov. “Production is being diverted from sugar to ethanol in India. Competition from corn ethanol is also increasing.”
The dilemma is this: use sugarcane for food or fuel. In Brazil, mills have the flexibility to shift between sugar and ethanol production, so the choice is relatively simple: if the economics favour fuel, more ethanol is produced, and vice versa. The 2025/26 season favoured food: 50.6% of south-central Brazilian cane went into sugar, up from 48.1% the season before ([11]).
Although analysts say the rapid rise of corn-based ethanol – which now accounts for 27% of Brazil’s ethanol output, up from around 20% a few years ago ([12]) – is helping to keep fuel supplies plentiful and limiting how attractive ethanol production is for mills, they say growing demand for ethanol in India is a key reason India is likely to remain absent from the global sugar market in coming years.
Government policy is again a factor here. India’s Ministry of Consumer Affairs, Food & Public Distribution lifted all restrictions on the production of ethanol by mills for the 2025/26 season to help the state hit its target of blending petroleum with 20% ethanol ([13]). While Indian mills do not enjoy the same flexibility seen in Brazil (making switching more problematic), the move opens up a new market for mills while helping to insulate India from global oil price volatility.
Does this mean that the ban has zero effect?
If India’s sugar export ban has the effect the government intends, the key beneficiaries will be Indian consumers, sugarcane growers and processors.
However, the losers will be people already among the poorest on earth. Sudan, Somalia, Sri Lanka, Tanzania and Yemen were the top five export destinations for Indian sugar in 2024 ([14]). This gives resonance to Alvar-Beltrán’s prediction that El Niño 2026 will hit the world’s most vulnerable hardest.
The exposure of Europe and the US, meanwhile, is limited. The European Union is the world’s largest producer of beet sugar ([15]), with imports to the bloc primarily coming from Ukraine, Brazil and other South and Central American producers ([16]). The biggest exporters of sugar to the US are Mexico, Brazil and the Dominican Republic ([17]).
European and US sugar producers are facing similar dilemmas to their counterparts in South America and Asia, albeit for a different reason. “These markets are seeing signs of declining sugar consumption in mature markets, which is forcing the industry to adapt,” says Milenkov, who expects sugar producers to diversify into added-value products such as sugar-derived starches and plant-based biochemicals in future.
Of course, a key factor in declining sugar consumption in the West is the toll too much of the stuff takes on people’s health, as well as growing regulatory pressure food manufacturers are under to cut the sugar content of their products. But swapping sugar for lower calorie alternatives is by no means simple and comes with significant cost challenges.
“Sugar reduction has moved beyond ‘swap sugar for high-intensity sweetener and call it a day’,” Thom King, chief innovation office at Icon Foods, told FoodNavigator in March, adding that sugar imparts a range of qualities beyond sweetness on food products, including mouthfeel and bulk. “Remove it, and the system collapses unless you rebuild it intelligently.”
That doesn’t come cheap. While artificial sweeteners like aspartame and acesulfame K have undoubtedly delivered cost savings for soft drinks brands as they’ve cut sugar content – chiefly because they’re far sweeter than sugar so much less is required ([18]) – food manufacturers still face considerable cost challenges relating to reformulation.
That’s because sugar alternatives like allulose, monk fruit, sweet proteins thaumatin and brazzein and fermentation-derived sweeteners are still considerably more expensive than the real thing ([19]). That means today’s low sugar prices may remove some of the urgency for manufacturers to reformulate, even if the strategic rationale and regulatory pressure remain.
In other words, sugar still offers plenty of bang for the buck.
