Sugar futures turned higher on Tuesday after moving lower earlier in the session, with buyers citing worsening weather conditions for key production regions. July New York sugar settled up 1.02% and August London ICE white sugar ended higher by 1.70%, as traders weighed concerns over India’s monsoon rains alongside an initial drag from a sharp drop in crude oil.
Key takeaways
- Price move: July New York sugar closed up 1.02%, while August London ICE white sugar finished up 1.70%.
- Catalyst: The market shifted higher as India’s monsoon rainfall was reported to be running below normal, alongside growing worries that El Niño could reduce rainfall across major sugar-growing countries.
- Initial headwind: Early losses were linked to crude oil’s steep decline, which can support more cane diversion away from ethanol and toward sugar production.
- Implication: Weather risk is once again driving the narrative, even as supply forecasts continue to be revised based on ethanol economics.
What drove the move
Traders said sugar prices erased early losses and settled higher on concerns over India’s crop prospects. Specifically, India’s Meteorological Department reported that cumulative monsoon rainfall was 32% below normal as of June 15. India’s monsoon season runs from June through September, making the report a key input for near-term production expectations.
The bullish turn came after an early selloff that traders attributed in part to crude oil weakness. The article noted that WTI crude oil fell more than 5% on Tuesday to a 3.5-month low. Lower crude prices can weaken ethanol economics, which may encourage mills to prioritize sugar output over ethanol—an effect that can increase sugar availability and pressure prices.
Beyond India, the weather backdrop supported the rebound. Japan’s Meteorological Agency confirmed that an El Niño weather pattern had formed across the equatorial Pacific. The emergence of El Niño is expected to curb rainfall in Brazil, India, and Thailand, the world’s three largest sugar-producing regions. Further support for the weather-risk narrative came from India’s own forecast revisions: the Indian Meteorological Department lowered its cumulative rainfall estimate for the June-September monsoon season to 90% of the long-term average, down from a 92% forecast issued earlier in April.
U.S. forecasts also pointed to elevated intensity risk, with the U.S. National Oceanic and Atmospheric Administration estimating a 67% probability of a “Super El Niño” this year.
How ethanol economics and balance forecasts are shaping expectations
While weather fears provided the late-session lift, sugar market participants continue to monitor how energy prices influence cane allocations between sugar and ethanol. The article cited Czarnikow’s decision to cut its global 2026/27 sugar balance estimate from a surplus of 1.4 million metric tons to a deficit of -100,000 metric tons, attributing the change to expectations that Brazil’s sugar mills produce more ethanol than sugar amid the crude-price rally that supported ethanol economics.
That supply-versus-ethanol tension has appeared in multiple agency forecasts referenced in the report. For Brazil, Conab’s initial report for the new sugar season projected 2026/27 output would decline 0.5% to 43.952 million metric tons, while ethanol output was expected to rise 7.2% year over year to 29.259 million liters. Separately, the USDA had projected Brazil’s 2026/27 sugar production at 42.5 million metric tons, down 3% year over year, citing mills crushing more cane for ethanol than for sugar.
On India, the article highlighted ongoing uncertainty around export flows and domestic supply. It noted that India introduced a quota system for sugar exports in 2022/23 after late rains reduced production and tightened domestic supplies. It also referenced the USDA’s view that India could return to surplus in 2026/27, forecasting a 2.5 million metric ton surplus, the first in two years.
What other forecasts imply for the market
Several broader balance-sheet projections underline why sugar remains sensitive to weather signals. The report cited the International Sugar Organization’s forecast that 2025/26 global production could reach a record 182 million metric tons, with a surplus estimate rising to 2.2 million metric tons. For 2026/27, however, the ISO projected production would fall 1.15% year over year to 180 million metric tons, with a global deficit of -262,000 metric tons, citing potential El Niño impacts on harvests in India and Thailand.
The report also referenced differing expectations from other analysts. StoneX forecast a -550,000 metric ton deficit for 2026/27, while Covrig Analytics cut its surplus estimate to 100,000 metric tons from a prior May estimate of 380,000 metric tons.
Bigger picture
With weather risk now moving to the front of the pricing narrative, investors appear to be recalibrating around the odds of rainfall shortfalls in major production countries. At the same time, the market’s sensitivity to crude oil prices remains relevant because it can quickly alter expectations for how much cane is routed to sugar versus ethanol. That combination—macro energy-driven incentives and El Niño-driven rainfall risk—helps explain why sugar prices were able to reverse early declines and finish higher.
Traders are likely to watch the next updates to monsoon metrics and evolving El Niño assessments, along with further revisions to country-level production and global balance estimates. Additional signals on ethanol margins and crude oil direction may also influence near-term sentiment as the market moves through the remainder of the growing season.
