Sugar futures experienced a notable downturn today, with May NY world sugar #11 (SBK26) dropping by -0.29 (-1.83%) and May London ICE white sugar #5 (SWK26) declining by -6.90 (-1.49%). This decline is primarily attributed to a significant -2% slump in crude oil prices (CLK26), which has triggered long liquidation in sugar futures markets, reversing recent gains.
Crude Oil’s Influence on Sugar Dynamics
The intricate relationship between crude oil and sugar prices stems from the latter’s role in ethanol production. Earlier this week, sugar markets had seen a bullish surge, with NY sugar rallying to a 5-month high and London sugar reaching a 5.5-month high. This was directly linked to a robust increase in crude prices, which had climbed to a 3.75-year high. Strong crude prices typically boost ethanol values, incentivizing sugar mills globally to divert sugarcane towards ethanol production and consequently curb sugar output, tightening supply. However, the recent reversal in crude oil has dampened this sentiment, leading to the current price pressure.
Persistent Global Surplus Concerns
Adding to the downward pressure on sugar prices are persistent concerns over a global sugar surplus. Earlier this month, sugar prices had plunged to 5.5-year nearest-futures lows on these very worries. Analysts from sugar trader Czarnikow, on February 11, projected a global sugar surplus of 3.4 million metric tons (MMT) for the 2026/27 crop year, following an even larger 8.3 MMT surplus in 2025/26. Similarly, Green Pool Commodity Specialists, on January 29, forecasted a 2.74 MMT global sugar surplus for 2025/26 and a 156,000 MT surplus for 2026/27. StoneX, on February 13, also anticipated a 2.9 MMT global sugar surplus in 2025/26.
The International Sugar Organization (ISO), in its February 27 forecast, projected a +1.22 MMT sugar surplus in 2025-26, a stark contrast to the -3.46 MMT deficit in 2024-25. The ISO attributed this surplus to increased sugar production in key regions like India, Thailand, and Pakistan, forecasting a +3.0% year-on-year rise in global sugar production to 181.3 MMT in 2025-26.
Regional Production Updates: India and Brazil in Focus
Regional production figures present a mixed picture. In India, the world’s second-largest sugar producer, the Indian Sugar and Bio-energy Manufacturers Association (ISMA) reported last Tuesday that sugar output from October 1 to March 15 for the 2025-26 season was up +10.5% year-on-year to 26.2 MMT. On March 11, ISMA projected India’s 2025/26 sugar production at 29.3 MMT, a 12% year-on-year increase, though this was a reduction from an earlier projection of 30.95 MMT. Furthermore, ISMA cut its estimate for sugar used for ethanol production in India to 3.4 MMT from a July forecast of 5 MMT, potentially freeing up more sugar for export. Indeed, India’s government approved an additional 500,000 MT of sugar for export for the 2025/26 season on February 13, supplementing the 1.5 MMT approved in November. The USDA’s Foreign Agricultural Service (FAS) also predicted a significant +25% year-on-year increase in India’s 2025/26 sugar production to 35.25 MMT, driven by favorable monsoon rains and expanded acreage.
Brazil’s Center-South region, another critical producer, showed some supportive signs for sugar prices, with Unica reporting on February 18 a -36% year-on-year fall in sugar production in the second half of January to just 5,000 MT. However, cumulative 2025-26 Center-South sugar output through January still rose +0.9% year-on-year to 40.24 MMT. The USDA FAS, for its part, predicted Brazil’s 2025/26 sugar production to rise by 2.3% year-on-year to a record 44.7 MMT. In Thailand, FAS predicted a +2% year-on-year increase in 2025/26 sugar production to 10.25 MMT.
Broader Global Outlook
The broader global outlook, as presented by the USDA in its bi-annual report released on December 16, reinforces the expectation of ample supply. The USDA projected global 2025/26 sugar production to climb +4.6% year-on-year to a record 189.318 MMT. While global human sugar consumption is also expected to increase by +1.4% year-on-year to a record 177.921 MMT, the projected production growth outpaces consumption. Interestingly, the USDA also forecast that 2025/26 global sugar ending stocks would fall by -2.9% year-on-year to 41.188 MMT, suggesting that while production is high, consumption is also robust.
Despite some localized supply disruptions, such as the closure of the Strait of Hormuz which Covrig Analytics estimates has curbed approximately 6% of the world’s sugar trade and constrained refined sugar output, the overarching narrative for sugar prices remains one of downward pressure. The recent slump in crude oil prices, coupled with consistent forecasts of a global sugar surplus from multiple analytical firms and robust production outlooks from major producers like India and Brazil, continues to weigh heavily on the market. Traders are closely monitoring the interplay between energy markets and agricultural commodities, as well as evolving supply-demand dynamics from key producing nations, as these factors collectively dictate the commodity’s trajectory.
