Sugar Prices Navigate Volatile Terrain as Global Supply Deficit Concerns Mount

October NY world sugar #11 (SBV26) rose by +0.46 (+2.63%) on the session, while December London ICE white sugar #5 (SWZ26) climbed +7.40 (+1.47%).

Sugar prices are trending higher, with London sugar reaching a one-week high. The market is trading sideways within a wide month-long range, bounded by last Tuesday’s one-month low and the 17.5-month high established on September 10.

On September 10, NY sugar reached a 17.5-month high driven by deficit outlooks. On September 1, the International Sugar Organization (ISO) projected a global sugar deficit of -200,000 MT for the 2026/27 season, a sharp contrast to the projected +1.1 MMT surplus expected for 2025/26. Additionally, the Thai Sugar Millers Corp projected on September 7 that Thailand’s 2026/27 sugar production could drop by -17% year-over-year to 10 MMT. As the world’s second-largest sugar exporter, Thailand’s production decline represents a significant supply concern.

Earlier forecasts highlighted shifting market dynamics. On August 3, Covrig Analytics revised its expectations, now forecasting a global sugar deficit of -300,000 MT for 2026/27, down from a June projection of a +100,000 MT surplus. Meanwhile, Czarnikow predicted on August 14 that the 2027/28 global sugar deficit could reach -2.9 MMT. This deficit is driven by Brazilian mills shifting focus toward ethanol production due to surging crude oil prices amid the US-Iran conflict. Czarnikow forecasts that global sugar production for 2027/28 will decline by -0.7% year-over-year to 177 MMT, primarily due to adverse weather conditions in India, the EU, and Thailand.

India’s Meteorological Department reported on Monday that cumulative monsoon rainfall from June to September was 12% below normal as of September 28, a notable improvement from the 42% deficit recorded on June 30. However, meteorological authorities warned that this year’s monsoon could be the weakest in 17 years. Given that India is the world’s second-largest sugar producer, monsoon performance remains a critical variable for the market.

In an effort to manage domestic supply strains, India’s Directorate General of Foreign Trade announced on August 20 that it would permit up to 1 MMT of raw sugar imports free of any taxes until October 31. This policy shift underscores the supply pressures within the global sugar market, as India typically operates as a net exporter and has not imported substantial volumes since the 2017-18 season.

Production challenges in Brazil continue to support bullish sentiment. On August 6, Unica reported that sugar production in Brazil’s Center-South region for June fell by -26.3% year-over-year to 3.903 MMT. As the world’s largest sugar producer, Brazil’s output contraction puts upward pressure on global prices.

Weather-related risks remain a primary driver of market volatility. A super El Niño event is expected to limit rainfall across Brazil, India, and Thailand—the top three global sugar producers. On July 8, the US Climate Prediction Center indicated that the emerging El Niño pattern across the equatorial Pacific has the potential to be one of the strongest observed in over 75 years.

Despite bullish supply factors, demand-side metrics are tempering upward price momentum. According to McDougall Global Views, the open interest in the October NY sugar contract, expiring Wednesday, suggests potential deliveries of approximately 1.8 MMT. This volume exceeds the six-year average, signaling weaker-than-expected demand.

Further dampening price prospects, StoneX revised its 2026/27 global sugar deficit estimate last Wednesday to -900,000 MT, narrowing the gap from its previous July projection of -1.7 MMT.

Earlier in the year, the Indian Sugar and Bio-energy Manufacturers Association (ISMA) adjusted its 2025/26 India sugar production forecast to 32 MMT, down from 32.4 MMT, with exports projected at 800,000 MT. India implemented an export quota system during the 2022/23 season following late rains that constrained domestic supplies. Meanwhile, the USDA projected in April that India would face a 2.5 MMT sugar surplus for 2026/27, marking its first surplus in two years.

The International Sugar Organization (ISO) anticipates a record global sugar crop of 182 MMT for the 2025/26 season, representing a +3.5% year-over-year increase, with a projected global surplus of 1.1 MMT. This is down from the May forecast of 2.2 MMT but represents a recovery from the -3.46 MMT deficit recorded in 2024-25.

Looking ahead to the 2026/27 season, however, the ISO forecasts a contraction in global sugar production to 180.1 MMT, a -1% year-over-year decline, resulting in a deficit of -200,000 MT, largely attributed to El Niño impacts on crops in India and Thailand. For the same period, StoneX raised its deficit forecast to 1.7 MMT from a May estimate of -550,000 MT, while Covrig Analytics adjusted its surplus projection down to 100,000 MT from 380,000 MT.

The USDA’s May biannual report projected that global 2026/27 sugar production would decrease by -6.5% year-over-year to 184.854 MMT, down from the record 186.056 MMT achieved in 2025/26. Global sugar consumption for 2026/27 is forecast to rise by +0.4% year-over-year to a record 179.991 MMT, with ending stocks projected to increase by 2.0% to 44.410 MMT. The USDA’s Foreign Agricultural Service (FAS) forecasts a -3.0% year-over-year drop in Brazil’s 2026/27 production to 42.5 MMT, while India’s output is expected to rise by +12% to 33.6 MMT on favorable monsoons and expanded acreage. Conversely, Thailand’s 2026/27 production is projected to fall by -15.6% year-over-year to 9.5 MMT.

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