World sugar prices were lower on Tuesday, with October New York futures falling to a one-week low as a sharp drop in crude oil weighed on the oil-linked ethanol outlook. October ICE white sugar also slipped, reflecting softer energy prices and a mix of supply expectations across major producing countries.
Key takeaways
- Price move: October New York world sugar #11 fell 1.22%, while October London ICE white sugar #5 dropped 0.33%.
- Catalyst: The selloff followed WTI crude oil dropping more than 6%, pressuring ethanol economics tied to cane processing decisions.
- Supply implication: Lower crude prices may encourage less cane diversion to ethanol, potentially supporting sugar availability.
- Weather risk remains: Markets are still weighing the possibility of El Niño, which could reduce rainfall in key growing regions and tighten supplies later.
What drove the sugar decline
Sugar prices came under pressure as investors reacted to a steep fall in crude oil. With WTI down more than 6% for the day, ethanol-linked margins weakened, reducing incentives for mills to allocate more cane to ethanol rather than sugar. According to the day’s commodity commentary, that dynamic can lead to mills worldwide diverting less cane toward ethanol production, increasing sugar supply prospects.
The move also extended recent shifts in the market’s supply outlook. While energy weakness weighed on prices immediately, expectations for improved weather conditions have recently undercut the sugar complex as well.
India’s monsoon trend and the El Niño offset
One of the factors cited for a softer near-term tone was improving monsoon conditions in India. Data from India’s Meteorological Department reported cumulative monsoon rainfall at 16% below normal as of July 27, an improvement from 42% below normal reported on June 30. The report notes that India’s monsoon season runs from June through September and that earlier forecasts had warned the season could be the weakest in 11 years.
That improvement is not the only weather narrative in play. Concerns about El Niño have continued to support prices at times, particularly given its potential to reduce rainfall in the world’s three largest sugar-producing regions: Brazil, India, and Thailand. According to the US Climate Prediction Center, the El Niño pattern emerging across the equatorial Pacific is likely to be among the strongest in more than 75 years, which would be expected to curb rainfall in those areas.
India’s weather office has also revised rainfall expectations downward, with its cumulative monsoon estimate for June–September lowered to 90% of the long-term average from 92% earlier. That combination—near-term monsoon progress alongside still-meaningful El Niño risk—has left sugar prices sensitive to incremental meteorological updates.
Brazil ethanol demand, mill diversion, and balance forecasts
Brazil remains central to the market because the country’s mills can shift output between sugar and ethanol. In a June report cited in today’s commentary, Unica said 2026/27 Center-South sugar production through May totaled 6.838 million metric tons, down 2.0% year over year. The same report indicated that the portion of sugarcane used for sugar fell to 41.42% from 50.09%, while the share routed to ethanol rose to 58.38% from 49.91%.
Traders also continue to track how crude oil strength—or weakness—affects that allocation. A June 11 update from sugar trader Czarnikow reduced its global 2026/27 sugar balance estimate from a surplus of 1.4 million tons to a deficit of about 100,000 metric tons, attributing the shift to Brazil’s ethanol demand outpacing sugar amid recent crude-price gains.
Earlier production guidance also points to a market that expects ethanol growth. On April 28, Conab projected 2026/27 Brazilian sugar output would decline 0.5% to 43.952 million metric tons, while ethanol output would rise 7.2% year over year to 29.259 million liters.
India supply outlook and global balance expectations
India’s trajectory is another swing factor for investors. On April 7, the Indian Sugar and Bio-energy Manufacturers Association revised its 2025/26 production forecast to 32 million metric tons from 32.4 million previously. ISMA also projected 2025/26 exports at 800,000 metric tons. The commentary notes that India implemented an export quota system in 2022/23 after late rains reduced production and constrained domestic supplies.
Looking ahead, the USDA projected an India 2026/27 sugar surplus of 2.5 million tons, described as the first surplus in two years. Meanwhile, multiple international outlooks have diverged on whether the world market tightens or relaxes.
According to the International Sugar Organization, global 2025/26 production is expected to reach a record 182 million metric tons, up 3.5% year over year, with a surplus estimated at 2.2 million metric tons. For 2026/27, however, ISO projected production would fall 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 cited in the report also vary: StoneX projected a 550,000 metric ton deficit for 2026/27, while Covrig Analytics cut its surplus forecast to 100,000 metric tons from a May estimate of 380,000 metric tons.
In its May biannual assessment, the USDA projected that global 2026/27 sugar production would decline 6.5% year over year to 184.854 million metric tons from a record 186.056 million in 2025/26. It also forecast human sugar consumption increasing 0.4% year over year to a record 179.991 million metric tons, with ending stocks rising 2.0% to 44.410 million metric tons.
USDA Foreign Agricultural Service estimates included Brazil sugar production at 42.5 million metric tons (down 3.0% year over year), India at 33.6 million metric tons (up 12%), and Thailand at 9.5 million metric tons (down 15.6%).
What to watch next
With crude oil acting as a near-term driver for sugar through ethanol economics, further weakness—or stabilization—in energy markets could continue to influence prices. Investors will also be watching ongoing monsoon updates in India and broader El Niño signals, alongside the next round of crop and production assessments from major agencies for the 2026/27 season.
