Global sugar prices surged on Friday, extending a week-long rally, as mounting concerns over diminished worldwide production pushed both New York and London futures to multi-month highs. October NY world sugar #11 (SBV26) closed up +0.88 (+5.65%), while October London ICE white sugar #5 (SWV26) advanced +16.50 (+3.39%). This sharp ascent saw NY sugar reach a 10-month nearest-futures high and London sugar hit an 11-month high, signaling a tightening supply outlook for the sweet commodity.
The significant gains on Friday underscore a growing apprehension among traders regarding the global sugar supply chain. Analysts point to a confluence of adverse weather conditions and shifting agricultural priorities in key producing nations as the primary drivers behind the current price surge. The market’s reaction reflects an increasingly bearish sentiment on future availability, moving from earlier forecasts of surpluses to a consensus of impending deficits.
Regional Production Woes Intensify
European and Brazilian Output Under Pressure
Europe and the UK are facing a significant downturn in sugar production, primarily due to persistent drought and hot weather. Data from S&P Global Energy indicates that sugar output in the European Union and the UK is projected to decline to 14.98 MMT this year, marking the lowest level in 11 years. This substantial reduction in a major consuming region adds considerable pressure to global supplies.
Further exacerbating the situation is Brazil, the world’s largest sugar producer. Recent reports from Unica revealed that Brazil Center-South June sugar production plummeted by -26.3% year-over-year to 3.903 MMT. This decline is partly attributed to Brazilian sugar mills increasingly diverting sugarcane to ethanol production rather than sugar, a trend influenced by the recent surge in crude oil prices, as noted by sugar trader Czarnikow. Conab, in its initial report for the new sugar season, forecast that 2026/27 Brazilian sugar output would decline by -0.5% to 43.952 MMT, while ethanol output is expected to climb by +7.2% year-over-year to 29.259 million liters. The USDA’s Foreign Agricultural Service (FAS) also predicted a -3.0% year-over-year fall in Brazil’s 2026/27 sugar production, reaching 42.5 MMT.
India’s Monsoon and El Niño Threat
Concerns are also mounting over India’s sugar crop, which is crucial given its status as the world’s second-largest sugar-producing country. The India’s Meteorological Department has warned that monsoon rainfall in India during August and September is “likely to be below normal,” with India’s Earth Science Ministry cautioning that this year’s monsoon could be the weakest in 11 years. While India’s cumulative monsoon rainfall showed some improvement, moving from 42% below normal on June 30 to 11% below normal as of August 7, the overall outlook remains precarious.
Adding another layer of uncertainty is the emergence of an El Niño weather pattern. The US Climate Prediction Center stated on July 8 that this El Niño is likely to be one of the strongest in over 75 years. This phenomenon is expected to curb rainfall significantly in Brazil, India, and Thailand—the world’s three largest sugar-producing regions—potentially disrupting harvests and further tightening global supplies. The USDA’s FAS, for instance, predicted that Thailand’s 2026/27 sugar production will fall by -15.6% year-over-year to 9.5 MMT. The International Sugar Organization (ISO) specifically cited the potential impact of an El Niño on harvests in India and Thailand when forecasting a global sugar deficit for 2026/27.
Analysts Project Global Deficits
The accumulating production challenges have prompted a significant revision in global sugar balance forecasts. Covrig Analytics now anticipates a global sugar deficit in 2026/27 of -300,000 MT, a stark reversal from its June forecast of a +100,00 MT surplus. Similarly, Green Pool Commodity Specialists raised their global 2026/27 sugar deficit estimate to -3.3 MMT from a June estimate of -1.76 MMT. StoneX also increased its 2026/27 global sugar deficit forecast to -1.7 MMT from a May estimate of -550,000 MT.
Even the International Sugar Organization (ISO), which had previously forecasted a record global sugar crop for the 2025/26 season with a surplus of 2.2 MMT, has shifted its outlook for the subsequent year. For 2026/27, ISO now forecasts global sugar production to fall by -1.15% year-over-year to 180 MMT, leading to a global sugar deficit of -262,000 MT. The USDA, in its biannual report released in May, projected that global 2026/27 sugar production would fall by 6.5% year-over-year to 184.854 MMT from a record 186.056 MMT in 2025/26. While global human sugar consumption is expected to increase +0.4% year-over-year to a record 179.991 MMT, the projected decline in production suggests a tighter market despite a forecasted 2.0% increase in global ending stocks to 44.410 MMT.
The convergence of unfavorable weather, strategic shifts in ethanol production, and the looming threat of a strong El Niño event has fundamentally altered the outlook for the global sugar market. With multiple analytical firms now projecting significant deficits for the upcoming 2026/27 season, the recent rally in sugar prices appears to reflect a genuine concern over tightening supplies, suggesting that consumers and industries reliant on sugar may face sustained higher costs.
