NEW DELHI – India's exports of molasses are likely to fall in 2019-20 (Oct-Sep) due to disparity between global and domestic prices, and high demand from domestic distilleries, said the country's leading molasses dealers.
Molasses is the leftover slurry after sugar that has been extracted from cane. It is used mainly to make ethanol. Indian government has been promoting the use of ethanol for blending in auto fuel and to help lift income of sugar mills.
In the ongoing season, exports are seen falling nearly 40% to about 450,000-500,000 tn, against 835,000 tn in 2018-19.
"India prices are too high especially in Maharashtra…there is some margin from Uttar Pradesh, Haryana, Bihar, Punjab and Himachal Pradesh. Conventional molasses prices may fall a little during peak season, then exports may happen. Prices will not fall much though as government's support for ethanol is there," a molasses exporter said.
Currently, Taiwan, Europe and Korea are offering $120-$125 per tn, while parity stands at $130-$140, depending on which state the shipment belongs to, a Mumbai-based leading molasses exporter said.
Following a rise in demand for molasses by distilleries and ethanol manufacturers, mills that sold molasses for free in Uttar Pradesh at the beginning of the last season, are now selling it for 4,500-5,000 rupees per tn.
In Maharashtra and Karnataka, mills are selling molasses for 8,000-8,500 rupees.
Prices of the by-product are higher in west India due to better quality as total recoverable sugar content here is 50-52%, while in Uttar Pradesh, it is 44-45%.
"Maharashtra may not…participate much in molasses exports as production in the state is likely to halve this season," the Mumbai-based exporter said.
Sugar output in the second largest producing state is likely to be 6.2 mln tn in 2019-20 compared with 10.7 mln tn last season, while in the largest producer, Uttar Pradesh, it is seen unchanged at nearly 12 mln tn, according to data from Indian Sugar Mills Association.
Sugar mills are selling molasses extensively in the domestic market rather than exporting as government has made producing ethanol remunerative in India, because of which mills are getting good prices for the by-product.
Apart from making ethanol from molasses, distilleries are also procuring the by-product from the market at very good prices to produce liquor, Director of Chennai-based ISP Group, K. Ramnath Apparao, said.
For 2019-20 (Dec-Nov), the government has increased the price of ethanol made from B-heavy molasses to 54.27 rupees a ltr from 52.43 rupees a ltr in 2018-19, and that of ethanol made from 100% cane juice and C-heavy molasses to 59.48 rupees a ltr and 43.75 rupees a ltr, respectively.
"…molasses exports have yet not started because mills are thinking whether to give molasses to distilleries so till now not a single container or vessel has moved out of the country. So most of the exports or vessel should commence after Dec 15 once there is little quantity in tanks," one of the exporters said.
Oil marketing companies have floated a tender for procurement of 5.11 bln ltr ethanol this year. In the first round of bidding, sugar mills offered 724.50 mln ltr ethanol from C-heavy molasses, and 581.5 mln ltr of the biofuel would be derived from B-heavy molasses, said an official at ISMA.
Apart from high domestic demand for the by-product and price disparity, low availability of sugarcane in the country has also left mills with fewer options this season.
Weak rainfall in 2018 led and low levels of water in key reservoirs had affected the sowing of cane plants, which led to lower production in 2019-20, traders said.
If India is seen producing 26.85 mln tn sugar in 2019-20, molasses output can be pegged at 10.74 mln tn. In 2018-19, India produced 32.95 mln tn of the sweetener and 13.18 mln tn of molasses, according to industry estimates.
US$1 = 70.78 rupees