Sugar prices fell on Friday, with July New York sugar settling at a 7-week low and August London ICE white sugar also closing lower. Dealers pointed to a firmer U.S. dollar and renewed expectations for freer Middle East flows if an interim U.S.-Iran agreement were reached, both of which weighed on sentiment toward the sweetener complex.
Key takeaways
- Price move: July NY world sugar #11 closed down 0.65% on the day, while August London ICE white sugar #5 fell 0.38%.
- Catalyst: A slightly stronger U.S. dollar and the prospect of improved regional shipping lanes under a potential U.S.-Iran interim deal pressured futures.
- Market implication: Weather signals and competing supply forecasts are keeping the market sensitive to changes in Brazil, India, and Thailand production outlooks.
- What supported prices: Reports of weaker-than-normal India monsoon rainfall offered some pullback protection for prices.
What drove the move
Friday’s decline reflected a broad shift in near-term risk appetite for sugar. Traders cited a slightly stronger U.S. dollar, which can make dollar-denominated commodities less attractive to non-U.S. buyers. The market also reacted to the possibility of a U.S.-Iran interim peace agreement that could allow more open sugar flows in the Middle East—an event that would likely reduce logistical constraints that have tightened supply dynamics.
According to Covrig Analytics, the closure of the strait has already curbed roughly 6% of the world’s sugar trade. That estimate helped frame Friday’s move: any step toward improved transit could reduce the need for buyers to pay up for near-term availability, even if broader supply risks remain.
Weather and supply forecasts kept buyers on the sidelines
Despite Friday’s weakness, sugar futures found some support from developments tied to crop conditions. India’s Meteorological Department reported that cumulative monsoon rainfall was 26% below normal as of June 12. With India’s monsoon season running from June through September, the update reinforced concerns that later-season moisture could fall short of expectations, potentially affecting cane and sugar output.
At the same time, supply projections remain mixed across major producing regions, leaving investors balancing bullish deficit scenarios against evidence of shifting production priorities. Czarnikow reduced its global 2026/27 sugar balance estimate, cutting the expected surplus of 1.4 million metric tons to a deficit of 100,000 metric tons. The firm linked the revision to Brazil’s sugar mills producing more ethanol than sugar, a pattern that has been reinforced by the rise in crude oil prices.
Another key factor is the probability of El Niño conditions. Japan’s Meteorological Agency confirmed an El Niño pattern across the equatorial Pacific on Wednesday. The emergence of El Niño is generally expected to curb rainfall in Brazil, India, and Thailand, which are the world’s three largest sugar-producing regions. India’s weather office recently lowered its June-September cumulative rainfall estimate to 90% of the long-term average, down from 92% forecast in April. Meanwhile, the U.S. National Oceanic and Atmospheric Administration (NOAA) estimates a 67% chance of a “Super El Niño” this year, described by NOAA as the strongest ever recorded.
How projections differ for 2025/26 and 2026/27
While short-term price action on Friday was driven by macro-linked forces such as currency and shipping prospects, medium-term fundamentals appear to be the main battleground for the market. The International Sugar Organization (ISO) forecast a record global sugar crop for the 2025/26 season and raised its surplus outlook, expecting production at 182 million metric tons, up 3.5% year over year, and a surplus of 2.2 million metric tons after a deficit in 2024/25.
For 2026/27, however, ISO projects production falling 1.15% year over year to 180 million metric tons and a global deficit of 262,000 metric tons, citing potential El Niño impacts on harvests in India and Thailand. Other forecasts also diverge: StoneX projected a deficit of 550,000 metric tons, while Covrig Analytics forecast a surplus of 800,000 metric tons.
Forecasts for the broader supply-demand picture have also been updated through the USDA and other agencies. In its bi-annual report released on December 16, the USDA projected global 2025/26 sugar production rising 4.6% year over year to a record 189.318 million metric tons and global human sugar consumption increasing 1.4% year over year to a record 177.921 million metric tons. The USDA also projected global 2025/26 ending stocks would decline 2.9% year over year to 41.188 million metric tons. For Brazil, USDA’s Foreign Agricultural Service (FAS) projected 2025/26 sugar production would rise 2.3% year over year to a record 44.7 million metric tons, while FAS projected India’s 2025/26 sugar production could increase 25% year over year to 35.25 million metric tons. FAS also projected Thailand’s 2025/26 sugar production would rise 2% year over year to 10.25 million metric tons.
For the Brazil crop specifically, earlier reports from Conab forecast 2026/27 output would decline 0.5% to 43.952 million metric tons, while ethanol output would climb 7.2% year over year to 29.259 million liters. Separately, the USDA projected Brazil’s 2026/27 sugar production at 42.5 million metric tons, down 3% year over year, noting mills are crushing more cane for ethanol than for sugar.
What to watch next
Next, investors will likely focus on fresh weather assessments for the El Niño trajectory, particularly rainfall updates for Brazil, India, and Thailand. Guidance from major crop-watch agencies and any further revisions to 2026/27 supply balance estimates could swing the market quickly, especially as traders continue to weigh macro factors—such as the U.S. dollar—against persistent concerns about dry conditions. Upcoming catalysts include additional meteorological updates on monsoon progression and subsequent supply-demand reports tied to the new sugar season.
