NEW YORK, March 25, 2026 — Sugar futures prices declined sharply in trading on Wednesday, pressured by a significant drop in crude oil markets. The weakness in energy prices triggered long liquidation in the sweetener’s contracts, which had recently rallied to multi-month highs.
Market Movement and Energy Link
May New York world sugar #11 (SBK26) closed down 1.83%, while May London ICE white sugar #5 (SWK26) fell 1.49%. The sell-off followed a more than 2% decline in crude oil futures (CLK26). The two commodities are linked because lower crude prices reduce the cost advantage of ethanol, a biofuel derived from sugarcane. This can discourage sugar mills from diverting cane to ethanol production, potentially increasing sugar supplies.
Just one day earlier, sugar prices had rallied to five-month highs in New York and 5.5-month highs in London. That strength was fueled by a surge in crude oil to its highest level in nearly four years, which had boosted the economic appeal of cane-based ethanol.
Conflicting Supply Factors
The market is balancing several competing supply-side narratives. Disruptions from the closure of the Strait of Hormuz provided some underlying support. According to Covrig Analytics, the closure has constrained approximately 6% of global sugar trade, limiting refined sugar output.
Conversely, broader market sentiment has been weighed down by projections for a continued global sugar surplus. Earlier in March, prices plunged to 5.5-year lows on these concerns.
Analyst Surplus Forecasts
Multiple analyst groups have published surplus projections for the current and upcoming crop years. On February 11, sugar trader Czarnikow forecast a global surplus of 3.4 million metric tons (MMT) for the 2026/27 season, following an 8.3 MMT surplus in 2025/26.
Green Pool Commodity Specialists, in a January 29 report, projected a 2.74 MMT surplus for 2025/26 and a smaller 156,000-ton surplus for 2026/27. StoneX, on February 13, estimated a 2025/26 surplus of 2.9 MMT.
The International Sugar Organization (ISO), in its February 27 forecast, predicted a 1.22 MMT surplus for the 2025-26 season, a reversal from a 3.46 MMT deficit in 2024-25. The ISO attributed the shift to increased production in India, Thailand, and Pakistan, forecasting a 3.0% year-over-year rise in global output to 181.3 million MMT.
Key Producer Updates
Recent data from major producing nations shows mixed signals. In Brazil, sugar production in the Center-South region for the second half of January fell 36% year-over-year to just 5,000 tons, according to a February 18 report from industry group Unica. However, cumulative output for the 2025-26 season through January was still up 0.9%.
India’s production remains a focal point. The Indian Sugar and Bio-energy Manufacturers Association (ISMA) reported last Tuesday that sugar output from October 1 to March 15 was 26.2 MMT, a 10.5% increase from the same period a year earlier. On March 11, ISMA projected India’s full 2025/26 production at 29.3 MMT, though it revised down its estimate for sugar diverted to ethanol production. This revision may allow for higher export volumes.
India’s government approved an additional 500,000 tons of sugar for export on February 13, adding to a 1.5 MMT quota approved in November.
Long-Term Projections
The U.S. Department of Agriculture (USDA), in a bi-annual report released December 16, projected global 2025/26 sugar production would climb 4.6% to a record 189.318 MMT. The USDA’s Foreign Agricultural Service predicted record output in Brazil (44.7 MMT) and a 25% increase in India to 35.25 MMT, driven by favorable weather and expanded acreage.
Market participants are now assessing whether the supportive factor of logistical disruptions and the energy-price link will outweigh the persistent headwind of ample global supplies. For more information on futures market data, visit the CFTC’s Commitments of Traders reports. Historical commodity price data is available from sources like the World Bank’s Commodity Markets Outlook.
This article was produced with AI assistance and reviewed by our editorial team for accuracy and quality.
