"Toddy" is a traditional drink which is made by-

Fermenting sap from palm

The correct answer is Option (2) → Fermenting sap from palm   

We use microbes or products derived from them everyday. A common example is the production of curd from milk. Micro-organisms such as Lactobacillus and others commonly called lactic acid bacteria (LAB) grow in milk and convert it to curd.The dough, which is used for making foods such as dosa and idli is also fermented by bacteria. 

A number of traditional drinks and foods are also made by fermentation by the microbes. ‘Toddy’, a traditional drink of some parts of southern India is made by fermenting sap from palms. Microbes are also used to ferment fish, soyabean and bamboo- shoots to make foods.