Sugar Prices Decline on Slumping Crude Oil Markets

July NY world sugar #11 (SBN26) fell 0.15 (-1.06%), while August London ICE white sugar #5 (SWQ26) dropped 2.10 (-0.47%).

Sugar prices slipped to a one‑week low on Wednesday, pressured by a steep decline in crude oil. WTI crude (CLN26) fell more than 5% to a seven‑week trough, reducing ethanol margins and encouraging sugar mills to shift cane crushing toward sugar production, thereby increasing sugar availability.

The outlook for global sugar supplies remains bearish. On May 27, Unica reported that Brazil’s Center‑South sugar output for the 2026/27 season rose 55.3% year‑over‑year in April to 2.475 million metric tons, reflecting higher yields and a sucrose content of 112.58 kilograms per ton of cane, a 5.4% increase from the previous year.

Bearish pressure is also coming from strong Thai sugar exports, the world’s second‑largest market. Thailand shipped 1.6 million metric tons of sugar from January to April 2026, up 29% year‑over‑year.

Despite these bearish fundamentals, sugar prices retain some support as concerns over dry El Niño conditions threaten production. El Niño is projected to reduce rainfall in Brazil, India and Thailand, the three leading sugar‑producing regions. India’s meteorological agency recently cut its June‑September monsoon forecast to 90% of the long‑term average, down from 92% in April. The U.S. National Oceanic and Atmospheric Administration (NOAA) puts the chance of an El Niño developing between May and July at 82%, with a 67% likelihood of a “Super El Niño” persisting through year‑end.

On April 28, Conab forecast that Brazil’s 2026/27 sugar output would slip 0.5% to 43.952 million metric tons, while ethanol production would climb 7.2% year‑over‑year to 29.259 million liters. Earlier, on April 21, the USDA estimated Brazil’s 2026/27 sugar production at 42.5 million metric tons, a 3% decline, as mills prioritized ethanol over sugar.

Sugar markets found some support amid worries that the continued closure of the Strait of Hormuz could disrupt supply chains. Covrig Analytics estimates that the strait accounts for roughly 6% of global sugar trade, limiting refined sugar output.

India’s sugar production from October 1 to April 15 rose 7.7% year‑over‑year to 27.48 million metric tons, according to the National Federation of Cooperative Sugar Factories. The Indian Sugar and Bio‑energy Manufacturers Association (ISMA) adjusted its 2025/26 production forecast to 32 million metric tons, down from 32.4 million, and projected exports of 800,000 metric tons. India introduced an export‑quota system in 2022/23 after late rains curbed output. The USDA, on April 30, expects a 2.5 million‑metric‑ton sugar surplus in India for 2026/27, the first surplus in two years. As the world’s second‑largest producer, India’s dynamics carry significant weight.

On May 18, the International Sugar Organization (ISO) projected a record global sugar crop for the 2025/26 season, raising its surplus estimate. ISO now expects global production of 182 million metric tons, up 3.5% year‑over‑year, and a surplus of 2.2 million metric tons, up from a February forecast of 1.22 million and a rebound from a 3.46 million metric‑ton deficit in 2024/25.

Looking ahead to 2026/27, ISO projects a 1.15% year‑over‑year decline in global production to 180 million metric tons, resulting in a 262,000‑metric‑ton deficit, citing potential El Niño impacts on Indian and Thai harvests. Private forecasters diverge: StoneX predicts a 550,000‑metric‑ton deficit on May 20, while Covrig Analytics expects an 800,000‑metric‑ton surplus and Czarnikow anticipates a 1.1‑million‑metric‑ton surplus.

The USDA’s December‑16 bi‑annual report projects a 4.6% year‑over‑year increase in global 2025/26 sugar production to a record 189.318 million metric tons, with human consumption rising 1.4% to 177.921 million metric tons. It also forecasts a 2.9% drop in ending stocks to 41.188 million metric tons. The USDA’s Foreign Agricultural Service (FAS) expects Brazil’s 2025/26 output to climb 2.3% to a record 44.7 million metric tons; India’s production to surge 25% to 35.25 million metric tons, driven by favorable monsoon rains and expanded acreage; and Thailand’s output to rise 2% to 10.25 million metric tons.

Source link