Global sugar prices saw an upward tick on Tuesday, driven by speculation that Brazil, a major sugar producer, may curb its output. This sentiment stems from Brazil’s recent announcement of new fuel subsidies designed to mitigate the impact of soaring gasoline and diesel prices, a move that analysts believe will bolster ethanol prices and incentivize sugar mills to prioritize ethanol production over sugar.
Ethanol Demand Drives Sugar Output Concerns
The July New York world sugar #11 contract (SBN26) closed up 1.90%, while the August London ICE white sugar #5 contract (SWQ26) rose 1.03%. The primary catalyst for this price movement is the anticipated shift in Brazil’s sugarcane allocation. By supporting ethanol prices, the fuel subsidies could lead Brazilian mills to crush more cane for ethanol, thereby reducing the volume available for sugar production.
This potential reduction in Brazilian sugar output is a significant factor for the global market. Citigroup, in a projection for the 2026/27 season, estimated Brazil’s sugar production at 39.50 million metric tons (MMT), notably lower than the 43.95 MMT forecast by Conab. Citigroup cited the increasing allocation of sugarcane to ethanol production due to high gasoline prices as the reason for this projected decline.
Broader Market Factors Support Higher Prices
Beyond the Brazilian domestic situation, several other factors are contributing to a supportive environment for sugar prices. Projections from the International Sugar Organization (ISO) for the 2026/27 season indicate a year-on-year fall in global sugar production to 180 MMT, potentially leading to a global deficit of 262,000 metric tons. This forecast is partly attributed to the potential impact of an El Niño weather pattern on harvests in key producing nations like India and Thailand.
Conversely, just days prior, sugar prices had dipped to one-week lows following an ISO forecast of a record global sugar crop for the 2025/26 season, estimating production at 182 MMT and a surplus of 2.2 MMT. However, the more recent outlook for the subsequent season paints a tighter supply picture.
Further tightening the global supply is India’s ongoing four-month ban on sugar exports, which remains in effect until September 30, aimed at safeguarding domestic supplies. This export restriction limits the availability of Indian sugar on the international market.
Analysis from other market participants also points towards a tightening market. Datagro revised its 2026/27 global sugar surplus deficit estimate to -3.17 MMT from -2.26 MMT. StoneX predicted a global deficit of 550,000 metric tons for the 2026/27 season, a significant shift from a projected surplus of 2.3 MMT in the 2025/26 season.
Brazilian Production Data Reflects Trend
Recent production data from Brazil already suggests a move towards prioritizing ethanol. Unica reported that in the first half of April 2026/27, Brazil’s Center-South sugar production fell 11.9% year-on-year to 647,000 metric tons. Crucially, the proportion of sugarcane crushed for sugar production decreased to 32.9% from 44.7% in the same period last year.
Conab’s initial report for the new sugar season projected a marginal decline of 0.5% in Brazilian sugar output for 2026/27, reaching 43.952 MMT. In contrast, ethanol output was forecast to climb by a substantial 7.2% year-on-year to 29.259 million liters. The USDA’s forecast for Brazil’s 2026/27 sugar production also indicated a year-on-year decrease of 3% to 42.5 MMT, attributing the decline to millers crushing more cane for ethanol.
Concerns over supply disruptions have also been exacerbated by the ongoing closure of the Strait of Hormuz, which has reportedly curbed approximately 6% of the world’s sugar trade and constrained refined sugar output, according to Covrig Analytics.
While earlier reports from the USDA in December 2025 projected a record global sugar production of 189.318 MMT for the 2025/26 season, with Brazil’s output potentially reaching a record 44.7 MMT and India’s production surging by 25% to 35.25 MMT, the market’s focus has now shifted to the potential for reduced output in the subsequent season due to the confluence of factors including Brazil’s ethanol focus and weather patterns in other key regions.
The market is closely monitoring these developments, with the potential for Brazil to curb sugar output due to its domestic fuel subsidy policy acting as a significant upward driver for global sugar prices in the near term.
