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Sugar turns sweeter on the back of a new ethanol policy. Can it become the white gold for investors?


Trailers laden with sugarcane are lined up at Bhali Anandpur sugarmill during the lockdown on April 16, 2020 in Rohtak, India.

Synopsis

Sugar stocks have emerged as incredible wealth creators in 2021 on the back of lower crop yields in Brazil and the Indian government’s latest policy on ethanol blending. But will this momentum continue with the renewed push for ethanol production or is it priced in at current levels?

In 1975, in the middle of an oil shock and a crash in sugar prices, Brazil decided to bolster its ethanol production. This was done through low interest rates to sugar farmers, tax incentives, and fixed ethanol prices. As a result, Brazil’s ethanol production went up from 600 million litres in 1975 to 30.7 billion litres in 2019. The country accounts for 30% of global ethanol production and 17% of sugar production. India accounts for 18% of

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