Sugar Remains Subdued as Global Supply Outlook Weighs

Sugar prices have been fluctuating below 15 cents per pound, remaining more than 10% lower than a year ago, as expectations of abundant global supplies continue to outweigh emerging production risks. The main bearish factor is India, where improved monsoon rains have boosted prospects for a larger sugar crop, while government measures to limit stock holdings aim to ensure adequate domestic availability. Lower crude oil prices have also pressured sugar, as weaker ethanol prices encourage mills, particularly in Brazil, to divert more sugarcane toward sugar production rather than ethanol, increasing supply. However, downside pressure has been partly offset by forecasts of a global sugar deficit in 2026/27, reflecting lower output in Brazil and Thailand and the potential impact of a strengthening El Niño on key producing regions. Meanwhile, the USDA revised US sugar stocks lower following data corrections and projects tighter domestic supplies.

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.