Sugar Futures Drop 3% as Crude Oil Retreats
Sugar prices declined sharply as crude oil reversed its recent surge, reducing the economic incentive for mills to prioritize ethanol production.
October NY world sugar #11 contracts fell 3.02 percent. October London ICE white sugar #5 contracts dropped 2.84 percent. The decline followed a 2 percent drop in WTI crude oil prices. Crude oil gave back part of its earlier 6.7 percent surge. Lower fuel costs weaken the price of ethanol. This shift encourages mills to process more cane into sugar. Supply expectations rise accordingly.
Thai Sugar Millers Corp projected a 17 percent year-over-year drop in 2026/27 production. Output is expected to fall to 10 million metric tons. Thailand remains the second-largest global sugar exporter. The International Sugar Organization forecast a 200,000 metric ton deficit for 2026/27. This contrasts with the projected 1.1 million metric ton surplus for the current season. Analysts at Covrig Analytics estimate a 300,000 metric ton deficit for the coming year.
Crude Oil Shifts Mill Priorities
StoneX raised its 2026/27 global deficit forecast to 1.7 million metric tons. This change reflects Brazilian mills producing more ethanol than sugar. High crude oil prices drove this production split. Czarnikow predicts a 2.9 million metric ton deficit for 2027/28. Lower planting levels of cane and beets drive this outlook. Global production is expected to fall 0.7 percent to 177 million metric tons. Weather disruptions in key regions contribute to this decline.
India's monsoon rainfall was 15 percent below normal through September 9. The Earth Science Ministry warned this could be the weakest monsoon in 11 years. India is the world's second-largest sugar producer. The country allowed 1 million metric tons of tax-free raw sugar imports. This move highlights domestic supply strain. India last imported sugar in large volumes during the 2017-18 season. Brazil's Center-South June sugar production fell 26.3 percent to 3.903 million metric tons.
El Niño Threatens Global Yields
A super El Niño event may curb rainfall in Brazil, India, and Thailand. These are the three largest sugar-producing regions. The US Climate Prediction Center identified the current pattern as one of the strongest in 75 years. ISMA revised India's 2025/26 production forecast to 32 million metric tons. Projected exports stand at 800,000 metric tons. The USDA expects a 2.5 million metric ton surplus in India for 2026/27. This would mark the first surplus in two years.
The International Sugar Organization projects a record 182 million metric ton crop for 2025/26. Production is up 3.5 percent year-over-year. The organization forecasts a 1.1 million metric ton surplus for the current season. According to GN markets/commodities (en-US), these figures provide a baseline for future pricing. Market participants monitor these data points closely. Any deviation from these projections can trigger volatility. The interplay between energy costs and agricultural output remains central to sugar trade dynamics.
