Sugar futures rose in Tuesday trading as analysts and industry reports pointed to a tightening global supply balance for the upcoming 2026/27 season. July NY world sugar #11 climbed 0.40%, while London white sugar for August delivery gained nearly 1%, reflecting growing market concerns over reduced output from key producers.
Forecast Shift From Surplus to Deficit
StoneX, a leading agricultural research firm, now projects the global sugar market will swing into a deficit of 550,000 metric tons in 2026/27, a sharp reversal from the 2.3 million metric ton surplus estimated for the current season. The revision has injected fresh momentum into prices that had been under pressure from earlier expectations of ample supply.
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Citigroup added to the bearish outlook on Monday, forecasting Brazil’s 2026/27 sugar production at 39.50 million metric tons — well below the official estimate of 43.95 million metric tons from Brazil’s food supply agency Conab. The bank attributed the gap to Brazilian mills diverting more sugarcane to ethanol production, driven by surging gasoline prices that make biofuel more profitable.
Brazil’s Production Under Pressure
Early-season data from Brazil’s Center-South region, the country’s main sugarcane belt, confirms the trend. Unica reported on April 30 that sugar production in the first half of April fell 11.9% year-over-year, with mills allocating only 32.9% of crushed cane to sugar, down from 44.7% in the same period last year.
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Conab’s initial forecast for the new season, released April 28, projects Brazilian sugar output will decline 0.5% to 43.952 million metric tons, while ethanol production is expected to climb 7.2% to 29.259 billion liters. The USDA echoed this view on April 21, forecasting Brazil’s 2026/27 sugar output at 42.5 million metric tons, a 3% annual drop, citing the same ethanol incentive.
El Niño Risk Looms Over Asian Producers
Beyond Brazil, weather risks are adding to supply concerns. Citigroup warned that a potentially strong El Niño weather pattern this year could have “a significant impact” on sugar production in India and Thailand over the next six to twelve months. Both countries are major exporters, and adverse weather could tighten global availability further.
The El Niño threat comes as India’s government has already approved additional sugar exports for the 2025/26 season, signaling that domestic production is recovering. The USDA projects India will return to a surplus of 2.5 million metric tons in 2026/27, its first in two years. However, any weather disruption could quickly reverse that outlook.
Geopolitical and Logistical Disruptions
Sugar prices have also found support from ongoing disruptions related to the closure of the Strait of Hormuz. According to Covrig Analytics, the strait’s closure has curbed approximately 6% of the world’s sugar trade, constraining refined sugar output and adding to supply chain uncertainty.
Meanwhile, India’s Food Secretary said last month that the government has no plans to ban sugar exports this year, easing fears that India might divert more cane to ethanol production following the Iran war’s impact on crude oil supplies. In February, India approved an additional 500,000 metric tons of sugar for export for the 2025/26 season, on top of 1.5 million metric tons approved in November.
Surplus Estimates Shrinking
Several analysts have trimmed their global surplus forecasts in recent weeks. Covrig Analytics cut its 2026/27 global sugar surplus estimate to 800,000 metric tons from 1.4 million metric tons. Sugar trader Czarnikow made an even larger revision, slashing its 2026/27 surplus estimate to 1.1 million metric tons from 3.4 million metric tons in February, and also reducing its 2025/26 surplus estimate to 5.8 million metric tons from 8.3 million metric tons.
The International Sugar Organization reported a 1.22 million metric ton surplus for 2025/26 in late February, following a 3.46 million metric ton deficit in 2024/25. The ISO attributed the surplus to increased production in India, Thailand, and Pakistan, with global output rising 3.0% year-over-year to 181.3 million metric tons.
What This Means for Consumers and Markets
For commodity traders and food manufacturers, the shift from surplus to deficit signals potential upward pressure on sugar costs through 2027. Higher sugar prices typically translate into increased costs for confectionery, soft drinks, and processed foods, though the pass-through to retail prices often lags by several months.
Investors in agricultural commodity ETFs and futures should monitor Brazil’s ethanol policy closely, as the gasoline-sugar price relationship will be a key driver of supply. Weather developments in India and Thailand over the next two monsoon seasons will also be critical in determining whether the deficit materializes as forecast.
Conclusion
The convergence of reduced Brazilian sugar output, rising ethanol demand, potential El Niño disruptions, and geopolitical supply constraints has created a fundamentally tighter outlook for global sugar markets. While India’s recovery offers some buffer, the balance of risks appears tilted toward higher prices in the near to medium term. Traders and industry participants will be watching Brazil’s next Unica report and monsoon forecasts for Asia for further direction.
FAQs
Q1: Why are sugar prices rising now?
Sugar prices are rising because analysts project a global deficit in 2026/27, driven by Brazilian mills diverting more sugarcane to ethanol production and potential weather disruptions in India and Thailand from El Niño.
Q2: How does Brazil’s ethanol production affect sugar prices?
Brazilian mills can switch between producing sugar and ethanol depending on profitability. When gasoline prices rise, ethanol becomes more attractive, reducing the amount of cane allocated to sugar production and tightening global supply.
Q3: Could El Niño really hurt sugar production?
Yes. El Niño patterns historically bring drier conditions to parts of India and Thailand, which can reduce sugarcane yields. Citigroup has warned that a strong El Niño could have a “significant impact” on production in these key exporting countries over the next 6 to 12 months.
