Sugar prices rose sharply on Friday, with the July NY No. 11 contract climbing +0.43% (+3.17%) and August London ICE white sugar advancing +19.30% (+4.34%), hitting a two-week high. Traders cited escalating concerns over India’s monsoon season performance, which delivered 42% below-normal rainfall as of June 26—the weakest start in a decade for this critical agricultural period. India’s Earth Science Ministry warned the 2023 monsoon could become the nation’s weakest in 11 years, threatening sugarcane yields in the world’s second-largest sugar producer.
India’s meteorological service further reduced its June-September monsoon rainfall forecast to 90% of historical averages on June 28, down from 92% projected in April. This exacerbates fears of reduced 2026/27 production, compounding Brazil’s ethanol-driven sugar supply shifts. Brazilian processors Unica reported on June 5 that 2026/27 sugar output through May was 6.838 million metric tons (MMT), a 2% year-over-year decline, as mills redirected 58.38% of sugarcane toward ethanol production—up from 49.91% last year. This pushed sugar’s share of cane usage to a 16-year low (41.42%).
Czarnikow, a global sugar trader, slashed its 2026/27 surplus projection from +1.4 MMT to -100,000 MMT on June 11, citing ethanol-focused production trends amid elevated crude prices. Meanwhile, Agropen’s ethanol expansion—from 29.259 million liters in 2025/26 to +7.2% growth year-over-year—highlights the sector’s strategic shift, mirrored by USDA estimates of Brazil’s 2026/27 sugar output falling 0.5% to 43.952 MMT.
El Niño’s global imprint adds volatility. Japan’s Meteorological Agency confirmed its onset in May, with NOAA predicting a potentially historic “Super El Niño” carrying a 67% probability. This climate pattern threatens rain-dependent regions: India’s revised monsoon forecast (90%) aligns with forecasts of drought in Brazil and Thailand, potentially disrupting three-fourths of global sugar production.
Geopolitical and economic factors also weigh. The Strait of Hormuz restoration eased Black Sea supply bottlenecks, trimming shipping costs and supporting demand-side prices. However, a 13-month-high U.S. dollar index ($DXY) weakened sugar’s appeal, with July sugar dipping to a two-month low on May 24 amid stronger export valuations.
Global trade models remain divided. The Food and Agricultural Organization (FAO) projected a 2025/26 global sugar surplus of 2.2 MMT, rebounding from a 2024-25 deficit. Conversely, the International Sugar Organization (ISO) revised 2026/27 outlook to a deficit of -262,000 MMT, while StoneX forecasts -550,000 MMT. USDA’s December 16 report estimated a 2025/26 global carryover stock of 41.188 MMT, underscoring market fragility.
Production forecasts vary by region. USDA projected India’s 2025/26 output at 35.25 MMT (+25% y/y) via improved acreage, while its April 30 report parsed a 2.5 MMT surplus in 2026/27. Conversely, India’s Sugar and Bio-energy Manufacturers Association (ISMA) lowered its 2025/26 production estimate to 32 MMT on May 18, citing export quotas set in the 2022/23 season after rainfall disruptions.
As analysts debate quality vs. quantity discrepancies, traders monitor India’s monsoon recovery, Brazil’s ethanol vs. sugar balance, and El Niño’s trajectory. With futures volatility escalating, market participants brace for near-term price swings driven by commodity-linked currency movements and weather updates.
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