Sugar Futures Approach 3-Week Lows

Sugar futures in the US traded around 14.7 US cents, a near three-week low, as favorable weather in major producers improved the supply outlook. Dealers said drier weather in top producer Brazil has allowed harvesting to accelerate in recent weeks after heavy rains in June disrupted fieldwork, while monsoon rainfall in second-largest producer India has also improved, although it remains below average. Even so, high oil prices limited more significant losses by increasing the competitiveness of ethanol compared to sugar. At the same time, the Brazilian government approved an increase in the mandatory blend of anhydrous ethanol in gasoline. The measure reinforced expectations of higher demand for the biofuel and a greater allocation of sugarcane to ethanol production, reducing the availability of sugar in international markets. Trades also monitored El Niño after the UN weather agency increased the likelihood of a strong event, which could hurt crops in coming months.

Sugar futures in the US fell below 15 US cents, reaching one-week lows, pressured by lower oil prices, which reduce incentives to divert sugarcane toward ethanol production and could boost sugar output. Investors also monitored the recovery of India's monsoon, which has eased some concerns over global supplies, although broader structural factors continue to support the market. The rainfall deficit narrowed to 15% below the historical average by July 8, a marked improvement from the 42% shortfall recorded at the end of June. However, India's Ministry of Earth Sciences continues to warn that this year's monsoon could still be the weakest in 11 years. Rainfall between June and September is critical for sugarcane development. Meanwhile, the El Nino risk remained a concern. The weather phenomenon typically causes drought and heat in major sugar-producing countries like India and Thailand, while it can also favor excessive rainfall during the harvest in Brazil.

Sugar futures in the US traded above 15 US cents, the highest level since mid-May, partly supported by higher oil prices, which encourage cane diversion to ethanol production and could tighten sugar output. At the same time, concerns over global supplies persisted, with a strengthening El Niño threatening crop production in key growing regions across Asia and the Americas. In India, weaker monsoon rains have raised concerns over lower sugar yields and a smaller sugarcane harvest, with insufficient rainfall potentially affecting both the current crop and the development of next season's harvest. Meanwhile, the market continued to monitor developments in top producer Brazil, where recent rainfall delayed harvesting in key growing regions. The latest data showed sugar production in Brazil's key Center-South region fell about 3% yoy to 2.31 million tons in the first half of June, pointing to continued growth in biofuel supply.