Sugar Prices Extend Week-Long Rally on Persistent Global Supply Worries

Global sugar markets witnessed a sustained week-long rally in prices, propelled by escalating concerns over supply. New York raw sugar futures (SBV26) reached a 10-month high, and London ICE white sugar futures (SWV26) climbed to a 15-month peak. As of today, the October New York world sugar #11 contract extended its gains, rising by 0.85%.

The sharp upward movement in prices is primarily attributed to adverse developments in the production outlook across key growing regions. According to S&P Global Energy data, drought and hot weather conditions in Europe are expected to reduce sugar production in the European Union and the UK to 14.98 million metric tons (MMT) this year, marking the lowest level in 11 years. In Brazil, the world's largest sugar producer, Unica reported a significant year-on-year decline of 26.3% in Center-South Brazil sugar production for June, falling to 3.903 MMT. Furthermore, a shift by Brazilian sugar mills towards ethanol production, influenced by rising crude oil prices, is also contributing to the tightening supply.

Adding to the global supply concerns, India, the world's second-largest sugar producer, faces an uncertain outlook. The India Meteorological Department has indicated that monsoon rainfall during August and September is likely to be “below normal.” India's Earth Science Ministry has warned that this year's monsoon season could be the weakest in 11 years, negatively impacting sugar crop expectations and exerting upward pressure on prices.

In a broader economic context, the anticipated El Niño weather phenomenon is playing a significant role. The US Climate Prediction Center stated in July that the El Niño weather pattern emerging across the equatorial Pacific could be one of the strongest in over 75 years. El Niño is expected to curtail rainfall in major sugar-producing regions such as Brazil, India, and Thailand, potentially disrupting global sugar output.

Market analysts and various organizations have revised their global sugar balance forecasts downwards for the 2026/27 season. Covrig Analytics now anticipates a global deficit of 300,000 MT, a reversal from its June forecast of a 100,000 MT surplus. Green Pool Commodity Specialists raised their 2026/27 global sugar deficit estimate to 3.3 MMT from 1.76 MMT in June. StoneX also increased its 2026/27 global deficit forecast to 1.7 MMT from a May estimate of 550,000 MT. The International Sugar Organization (ISO) projects that global sugar production for 2026/27 will fall by 1.15% year-on-year to 180 MMT, leading to a global sugar deficit of 262,000 MT. The US Department of Agriculture (USDA) forecasts that global 2026/27 sugar production will decline by 6.5% year-on-year to 184.854 MMT, while global human sugar consumption is expected to rise by 0.4% year-on-year to a record 179.991 MMT. Thailand's sugar production for 2026/27 is also expected to fall by 15.6% year-on-year to 9.5 MMT. These projections collectively indicate that tight supply conditions are likely to persist in the sugar markets in the coming period.