MarketsAnalysis

India may blend less ethanol as drought lifts sugar, corn and rice prices

India will likely blend less ethanol this supply year as drought lifts Indian corn, sugar and rice prices, even as edible oil imports run high.

By Procupy News DeskPublished 4 Nov 2026, 12:07 PM IST5 min readSource: Mint

In 60 words

India will likely blend about 15% ethanol into petrol this supply year, down from 20%, after barring ethanol from sugarcane juice, syrup and B-heavy molasses and cutting maize ethanol prices. Drought has lifted Indian corn and sugar prices about 40% and rice 20%. October edible oil imports hit a two-year high on dealer estimates, and rice exporters warn that broken rice curbs could return.

Key points

India's ethanol blend rate may fall to about 15% this supply year from 20%, producers and analysts said¹.
The October 16 oil marketing tender excluded sugar-based ethanol and cut maize ethanol to ₹68.86 a litre from ₹71.86².
Monsoon rainfall was nearly 13% below normal, and Indian corn and sugar prices rose about 40% to records¹.
India bought 1.74 million tonnes of edible oil in October, dealer estimates show; SEA data is due by mid-November³.

India's ethanol blending rate will probably fall to about 15% this supply year from 20%. The government stopped buying ethanol made from sugarcane juice, sugar syrup and B-heavy molasses, and cut the price it pays for maize ethanol^1, 4. The move marks a food-first turn in the world's largest vegetable oil buyer, biggest rice exporter and largest sugar consumer^3, 5, 2.

Reuters reported the expected decline on November 4, in a report carried by BusinessLine and The Economic Times. It cited industry executives and GK Sood, chairman of agribusiness company KN Agri Resources^1, 4.

The trigger is weather. A severe El Nino cut India's monsoon by nearly 13% from normal, the lowest rainfall in more than a decade¹. Concerns about crop shortages sent corn and sugar up about 40% to record highs and rice up 20%¹. Retail food inflation rose to 7.74% in September from 5.97% a month earlier¹.

Policy is official, the 15% is a forecast

On October 16, Bharat Petroleum tendered for about 11 billion litres of ethanol for November 2026 to October 2027 on behalf of the oil marketing companies². The tender excluded ethanol made from sugarcane juice, sugar syrup and B-heavy molasses, kept C-heavy molasses eligible, and cut the maize procurement price to ₹68.86 a litre from ₹71.86^2, 6.

"The Government of India has issued directions that sugar diversion for ethanol be reduced to zero for ethanol supply year 2026-27," the tender document said².

The Food Ministry wrote to mills and state excise secretaries on October 22⁷. It said sugar diversion to ethanol is not permitted in the supply year from November 2026 to October 2027⁷.

The 15% figure is not official policy. Sood put the likely rate at around 15%¹. Four producers, who spoke to Reuters on condition of anonymity, expect 15% to 17%, depending largely on corn prices¹. A government spokesperson did not respond to a Reuters request for comment¹.

What the harvest says

Corn output could fall by as much as 15% from this year's record 55 million tonnes, according to industry estimates¹. The livestock sector's kharif estimate is 23.21 million tonnes, down 16.75% from the previous year's estimate, with maize acreage down 9.01%⁸.

For sugar, trade estimates for 2026-27 cluster at 27 million tonnes to 29 million tonnes, against domestic consumption of 28.5 million tonnes to 29 million tonnes⁹. Global analysts put production at 28.4 million tonnes to 29.5 million tonnes⁹. ISMA, the sugar and bio-energy manufacturers' body, put closing stock for 2025-26 at about 36 lakh tonnes¹⁰.

October crushing set a record of 8.45 lakh tonnes, largely from early-starting Maharashtra mills, which produced 7.20 lakh tonnes, and Karnataka, which produced 80,000 tonnes¹¹. No sugar was produced in Uttar Pradesh, the largest cane state¹¹.

Rice looks different. Production was a record 154.02 million tonnes in 2025-26, and the country exported about 21.57 million tonnes in the last fiscal year⁵. State reserves including paddy reached 59.6 million tonnes on September 1, against a government target of 10.3 million tonnes for October 1¹². The USDA still forecasts the 2026/27 crop at 147 million tonnes, down 4.5%¹².

Export curbs: a risk, not a policy

The Indian Rice Exporters' Federation said on November 3 that it could not rule out restrictions on 100% broken rice exports, with international prices reportedly above $360 a tonne⁵. No fresh restrictions have been announced⁵. India banned broken rice exports from September 2022 until March 7, 2025⁵.

Domestic prices show the pressure. The all-India wholesale average for broken rice rose 5.3% to ₹3,036 a quintal on November 2 from ₹2,883 on October 10⁵. The wholesale price index for broken rice was running at 5.38% year-on-year inflation in September⁵.

For sugar, a ban was imposed last season. The government stopped exports in 2025-26 after allowing 15 lakh tonnes earlier in that season⁷.

India supplies more than 40% of global rice trade and reaches more than 140 countries¹². The USDA expects Indian rice exports of 24 million tonnes in 2027, down 4%, partly on lower broken and white rice shipments¹².

The buying side

India bought 1.74 million tonnes of edible oil in October, the highest in more than two years, dealers' average estimates showed³. Palm oil reached 866,000 tonnes, the highest since August 2025, and soyoil set a record of 653,000 tonnes³. Sunflower oil doubled to 223,000 tonnes³. The Solvent Extractors' Association of India publishes its October data by mid-November³.

Those volumes are dealer estimates, not official data³. India cut the basic import duty on crude and refined edible oils in September³. The country imports 16 million to 17 million tonnes of the 26 million tonnes of edible oil it uses, and spent about $18.3 billion on vegetable oil imports in 2024-25¹³.

In sugar, the duty-free quota of 10 lakh tonnes of raw sugar now runs to December 31⁷. Industry sources told BusinessLine that no imports had taken place by late October, because import costs were above domestic prices⁷. They said 3 to 4 lakh tonnes of the quota had been surrendered, though this could not be officially confirmed⁷.

On feed, poultry associations are seeking duty-free imports of non-GMO maize and the release of Food Corporation of India grains unfit for human consumption¹⁴. They plan to meet government representatives in New Delhi later next week¹⁴.

What is already priced in

March raw sugar futures were quoted at 19.42 cents a pound, or $431.55 a tonne, and March white sugar at $538.70 a tonne, with prices up about 30% year to date⁹. Corn on the Chicago Board of Trade was $4.51 a bushel and soybeans $12.41-1/4 a bushel on October 26¹⁵.

Indian domestic prices are the ones at records. Ex-mill sugar is quoted above ₹5,000 a quintal and the average retail price is ₹58.87 a kilogram⁹. Indian rice export quotes are at their highest in more than a year¹².

For foreign buyers, the immediate risk sits in rice and in any new export restriction, rather than in the raw sugar futures price.

What to watch

The SEA import data lands in mid-November³. Any official notification on broken rice exports would follow a government decision, and IREF has already advised exporters to be careful with forward contracts⁵. Crushing in Uttar Pradesh and the winter corn crop will decide whether the 15% blending figure holds^1, 7.

Distilleries borrowed to build about 20 billion litres a year of capacity, which lower blending leaves underused¹.

What this means for procurement teams

For buyers in India and anyone sourcing from it, the first cost change is in feed and food inputs, not fuel. Indian corn and sugar prices are up about 40% and rice 20%¹. Poultry feed, which is 65% to 70% of production cost, is directly exposed to a maize crop that one industry estimate puts 16.75% lower⁸.

Import duty is moving the other way. India cut the basic import duty on crude and refined edible oils in September and bought 1.74 million tonnes in October on dealer estimates³. Buyers shipping palm, soyoil or sunflower oil into India should build the duty change into landed cost before fixing volumes, and treat the mid-November SEA data as the first independent industry check³.

Contract risk sits in export rules. No new rice restriction has been announced, but IREF has told exporters to be careful with forward contracts⁵. Buyers of Indian rice or broken rice should check force majeure and government-action clauses, and confirm that a change in export policy is covered before paying an advance.

Concrete steps: line up a second rice origin, keep index-linked or price-review triggers in sugar and edible oil contracts, and test maize substitution in feed formulas before supplies tighten, not after^1, 3, 12.

Sources

1.BusinessLine, India puts food before fuel as El Niño dents ethanol ambitions; blending in petrol may fall to 15%, 4 November 2026. Accessed 4 November 2026.
2.Mint, OMCs exclude sugarcane-based ethanol from FY27 tender, cut maize incentive, 18 October 2026. Accessed 4 November 2026.
3.The Economic Times, India's palm oil imports hit 14-month high, soyoil purchases set record, 4 November 2026. Accessed 4 November 2026.
4.The Economic Times, Drought threatens India's 20% ethanol blending target as food takes priority, 4 November 2026. Accessed 4 November 2026.
5.BusinessLine, India may reimpose broken rice export restrictions as prices cross $360 per tonne: IREF, 3 November 2026. Accessed 4 November 2026.
6.BusinessLine, India’s ethanol transition: Can grain-based feedstocks fill the gap left by sugar?, 1 November 2026. Accessed 4 November 2026.
7.BusinessLine, Indian Food Ministry asks States to ensure no sugar is diverted for ethanol, 22 October 2026. Accessed 4 November 2026.
8.BusinessLine, Livestock sector estimates 17% drop in kharif maize output due to drought in Karnataka, Maharashtra, 23 October 2026. Accessed 4 November 2026.
9.BusinessLine, Sugar will likely be a bitter pill for Indian consumers over the next year, 28 October 2026. Accessed 4 November 2026.
10.BusinessLine, As India depends more on mills to start sugar production in Nov, rains may spoil plans in UP, 27 October 2026. Accessed 4 November 2026.
11.BusinessLine, India’s sugar production up at a record high of 8.5 lakh tonnes in October, 2 November 2026. Accessed 4 November 2026.
12.BusinessLine, India can become a reliable exporter of rice, instead of the product being a seasonal commodity, 25 October 2026. Accessed 4 November 2026.
13.Mint, Yellow Revolution 2.0: Inside India’s ₹11,000-crore bet on domestic palm oil, 26 October 2026. Accessed 4 November 2026.
14.BusinessLine, Hit by feed costs, poultry industry seeks duty-free maize imports, 3 November 2026. Accessed 4 November 2026.
15.BusinessLine, Soybeans down 1.2% after rally, record US harvest weighs, 26 October 2026. Accessed 4 November 2026.

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