Global Market Outlook On Molasses and LCD

Molasses prices are driven by:

  • Crude oil and ethanol production dynamics
  • Sugar supply–demand scenario
  • Policy changes on import and export of bio-ethanol and bio-ethanol mandates
  • Supply and demand of molasses

Molasses – Value Chain Analysis

One MT of cane/beet will yield 265 pounds of sugar and 2.3 gallons of ethanol. Price realization from ethanol drives the production of sugar. In Brazil, at present, the price of sugar is 1.15 times higher than the price of ethanol, which is driving the sugar production in the country

  • The leftovers from sugar production, like molasses and sugar beet pulp, can be used for other purposes, such as animal feed, paper, yeast, and amino acid production, in culture media for the biotechnological production of alcohol, citric acid, nutritional yeast, and as a soil conditioner
  • Press mud is used in the bio fertilizer industry and bagasse goes into paper manufacturing

Molasses – Augmenting Supplies With Moderate Demand Globally

The global production of molasses stood at 67.7 MMT, and it is expected to grow at a CAGR of 5.3 percent, bolstered by increasing sugar production in the Asian countries, while demand is likely to increase from 67.1 MMT in 2018 at a CAGR of 6.2 percent in the next five years.

Asia is the largest producer of molasses globally, owing to easy access to raw material sugar cane. Animal feed and biofuel production remain the major end use of molasses in the major producing countries, while only 10 percent of the molasses produced is traded globally.

Global Production and Consumption of Molasses 

  • Production of molasses is expected to increase by 4.8 MMT in 2017/2018, driven by an increase in cane crush in the Asian and South American regions
  • As molasses is in-evident by-product of sugar processing, it follows the sugar production trend
  • Production of cane molasses is dominant globally with 87 percent, while beet molasses are produced only in the EU and in some parts of the US and Africa
  • Asia and South America holds 70 percent of the production share, owing to proximity to the raw material sugar cane
  • Demand of molasses to exceed production until 2016, post removal of sugar production quotas in the EU, the supply of sugar and molasses increased accordingly

 Key Drivers of Molasses and LCD

Expected surge in crude oil prices on an average in the next two years to curb the allocation of cane towards sugar production, thereby supporting molasses prices in 2018 and 2019 by 1–2 percent and 4–5 percent, respectively.

  • Ethanol production and molasses are inversely correlated, as more cane is allocated towards ethanol production, lesser cane shall be allocated towards sugar production
  • Thus, lesser sugar produced is equivalent to lesser molasses production, a co-product obtained in sugar refining process
  • It is forecasted that in 2018, ethanol production is likely to increase, owing to surge in crude oil prices, leading to higher allocation of cane for ethanol and lower molasses produced, while the trend is likely to continue in 2019, as sugar supplies are not expected to increase
  • Crude oil price is directly proportional to molasses production
  • Whenever the price of crude oil fall by >15 percent, it is not profitable for the end users to use blended bioethanol, and hence, they move towards using gasoline directly
  • During those moments, the production of ethanol is restricted by falling demand, leading to higher allocation of cane towards sugar production, and hence, higher molasses production