India to Halt Sugar Exports for Years as El Nino and Ethanol Squeeze Supply

India, once the world's second-largest sugar exporter, is expected to stay out of the global export market for at least three more seasons. As of June 2026, lower sugarcane availability combined with surging ethanol demand has left the country with little surplus to ship abroad, according to Reuters.

The situation has tightened progressively over recent months. The Directorate General of Foreign Trade placed all categories of sugar, including raw, white and refined, under the prohibited category, freezing outbound shipments until 30 September 2026. This marked a shift from earlier quantitative restrictions to a total export freeze, driven by both agro-climatic and structural pressures on the sector.

Two forces are reshaping the picture.

First, El Nino weather conditions are forecast to weaken India's monsoon rains this year to their lowest level in eleven years, threatening cane production during the critical planting window for the 2027-28 sugar year. Sugarcane has a long vegetative phase, taking eleven to twelve months in North India and up to eighteen months for certain crops in Maharashtra, so any disruption now carries effects far into the future.

Second, rising ethanol demand is diverting cane and molasses away from sugar. Mills are channeling B-heavy molasses and direct cane juice toward ethanol distillation, supported by the government's push to reach a 20 percent ethanol blending target in petrol. This gives mills a stable alternate revenue stream insulated from volatile global sugar prices, but it removes large volumes of sugar from the export pool.

During the five seasons up to 2022-23, India exported an average of 6.8 million metric tonnes of sugar each year, accounting for nearly 10 percent of global trade. Its prolonged absence removes a key balancing supplier from the market. The shortfall is expected to tighten supplies for importing countries across Asia, Africa and the Middle East, while supporting benchmark prices in London and New York.

Global commodity firms have already begun warning their leadership teams about shrinking export opportunities from India. Maharashtra closed the 2025-26 crushing season as the largest sugar-producing state at 99.20 lakh tonnes, ahead of Uttar Pradesh and Karnataka, yet severe water stress and depleting aquifers in rain-shadow regions are forcing a rethink of long-term cane sustainability in the belt. With the structural shift toward biofuel and the climate risk both pointing the same direction, traders expect India to remain a marginal or absent player in global sugar exports well beyond 2026.