March 20, 2026 — Sugar futures traded near multi-month highs, supported by strong gasoline prices that boost ethanol demand and ongoing supply disruptions from a key global shipping route. The market is balancing these bullish factors against projections for continued global surpluses.
Market Movement and Key Drivers
May New York world sugar futures rose sharply, touching a fresh five-month high during the session. The London white sugar contract, however, turned lower. Analysts attributed the divergence in part to currency fluctuations, with a stronger U.S. dollar applying some pressure to dollar-denominated commodities.
The primary upward force came from the energy complex. Gasoline futures surged more than 2% and recently reached their highest level in over three years. High gasoline prices make ethanol production more profitable, encouraging sugar mills, particularly in Brazil, to allocate more cane toward biofuel production instead of sugar. This shift directly reduces sugar output, tightening available supplies.
Supply Chain Disruption
Further support stems from a significant logistical bottleneck. The closure of the Strait of Hormuz has constrained the flow of refined sugar, according to analysis from Covrig Analytics. The firm estimates the strait’s closure has impacted approximately 6% of global sugar trade, creating a physical shortage in some markets and supporting price benchmarks.
This comes after sugar prices plunged to multi-year lows earlier in the month, weighed down by persistent concerns over a global supply glut. The market is now grappling with these competing narratives of immediate tightness and longer-term surplus forecasts.
Conflicting Supply Forecasts
Industry analysts and organizations have issued a range of projections for global sugar balances, creating uncertainty about the market’s direction.
Sugar trader Czarnikow forecast a global surplus of 3.4 million metric tons for the 2026/27 crop year in a February 11 report. This would follow an estimated 8.3 MMT surplus for the 2025/26 season. Similarly, Green Pool Commodity Specialists projected a 2.74 MMT surplus for 2025/26 in a January 29 update.
The International Sugar Organization (ISO), in a February 27 forecast, predicted a smaller surplus of 1.22 million metric tons for the 2025/26 season. The ISO noted this follows a deficit of 3.46 MMT in the prior season. It attributed the expected surplus to increased production in India, Thailand, and Pakistan, forecasting a 3.0% year-over-year rise in global output.
Regional Production Data
Recent data from major producers paints a mixed picture. In Brazil, sugar production in the key Center-South region fell sharply by 36% year-over-year in the second half of January, as reported by industry group Unica on February 18. However, cumulative output for the 2025-26 season through January remained slightly higher than the previous year.
India’s production is robust. The Indian Sugar and Bio-energy Manufacturers Association (ISMA) reported this week that sugar output from October 1 to March 15 was up 10.5% year-over-year. The association recently revised its full-season production estimate to 29.3 MMT, which is below an earlier projection but still represents significant growth.
ISMA also reduced its estimate for sugar diverted to ethanol production, a move that could free up more sugar for export. India, the world’s second-largest producer, has already approved additional export quotas for the current season.
What’s Next for Sugar Markets
Traders will monitor several factors in the coming weeks. The duration of the Strait of Hormuz closure and its continued impact on refined sugar logistics will be critical for near-term supply. Ethanol demand, driven by gasoline prices, will influence how much cane Brazil processes into sugar versus biofuel.
Finally, weather patterns in key growing regions and any further adjustments to export policies from India will shape the market’s fundamental balance. The tug-of-war between immediate bullish catalysts and projected surplus volumes is likely to maintain volatility.
For official data on agricultural commodities, see the U.S. Department of Agriculture reports. Market participants can also review filings from the Intercontinental Exchange, which lists sugar futures contracts.
This article was produced with AI assistance and reviewed by our editorial team for accuracy and quality.
