Sugar Futures Decline Amid Mounting Demand Worries and Shifting Supply Forecasts

October NY world sugar #11 (SBV26) settled down 0.08 cents (-0.46%) on Friday, while December London ICE white sugar #5 (SWZ26) dropped $7.30 (-1.43%).

Sugar futures retreated on Friday as demand concerns weighed on sentiment. According to McDougall Global Views, open interest in the expiring October NY sugar contract suggests deliveries could reach approximately 1.8 million metric tons (MMT), exceeding the six-year average and signaling tepid physical demand. The contract expires next Wednesday.

Last Tuesday, NY sugar touched a one-month low and London sugar hit a 1.5-month low on similar demand weakness. The expired October London contract saw 499,350 MT delivered—a 91% year-over-year increase and one of the largest October deliveries on record, further underscoring soft physical offtake.

Adding to the bearish tone, StoneX narrowed its 2026/27 global sugar deficit estimate to 900,000 MT from a previous 1.7 MMT shortfall projected in July.

Speculative positioning may amplify downside risk. The latest Commitment of Traders report showed funds increased net long NY sugar positions by 791 contracts in the week ended September 15, bringing the total to 161,342—the highest level in nearly three years—raising the potential for long liquidation.

Earlier this month, NY sugar reached a 17.25-month high on global deficit expectations. On September 1, the International Sugar Organization (ISO) forecast a 2026/27 deficit of 200,000 MT, contrasting with a projected 1.1 MMT surplus for 2025/26. Meanwhile, the Thai Sugar Millers Corporation projected a 17% year-over-year drop in 2026/27 Thai output to 10 MMT; Thailand ranks as the world’s second-largest sugar exporter.

Covrig Analytics now sees a 2026/27 deficit of 300,000 MT, revising from a June surplus forecast of 100,000 MT. Czarnikow projects a larger 2.9 MMT deficit for 2027/28, citing Brazil’s shift toward ethanol production amid elevated crude prices and weather disruptions across India, the EU, and Thailand. The group forecasts 2027/28 global production to slip 0.7% to 177 MMT.

India’s cumulative monsoon rainfall through September 23 stood 15% below normal, though improved from a 42% deficit at end-June. The Meteorological Department warns this could be the weakest monsoon in 17 years. India is the world’s second-largest sugar producer.

On August 20, India authorized duty-free imports of up to 1 MMT of raw sugar through October 31—a notable shift for a traditional exporter that last imported significant volumes in 2017-18, highlighting global supply strain.

Brazilian production declines offer price support. UNICA reported Center-South June output fell 26.3% year-over-year to 3.903 MMT. Brazil remains the world’s top sugar producer.

El Niño concerns remain a bullish wildcard. A strong event could curb rainfall across Brazil, India, and Thailand—the top three producing regions. The U.S. Climate Prediction Center indicated in July that the current El Niño could rank among the strongest in over 75 years.

In April, the Indian Sugar and Bio-energy Manufacturers Association (ISMA) trimmed its 2025/26 production estimate to 32 MMT from 32.4 MMT, with exports pegged at 800,000 MT. India has maintained export quotas since 2022/23. Conversely, the USDA forecasts a 2.5 MMT surplus for India in 2026/27, the first in two years.

ISO projects a record 2025/26 global crop of 182 MMT (+3.5% year-over-year) and a 1.1 MMT surplus, down from a May forecast of 2.2 MMT, rebounding from a 3.46 MMT deficit in 2024/25. For 2026/27, ISO sees production falling 1% to 180.1 MMT with a 200,000 MT deficit, citing El Niño risks to Indian and Thai harvests. StoneX raised its 2026/27 deficit forecast to 1.7 MMT in August from 550,000 MT in May, while Covrig cut its surplus estimate to 100,000 MT from 380,000 MT.

The USDA’s May biannual report projects 2026/27 global production at 184.854 MMT (-6.5% year-over-year), consumption rising 0.4% to a record 179.991 MMT, and ending stocks increasing 2.0% to 44.410 MMT. Brazil’s output is seen falling 3.0% to 42.5 MMT; India’s rising 12% to 33.6 MMT on favorable rains and acreage; and Thailand’s declining 15.6% to 9.5 MMT.

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