Sugar futures extended a week-long rally on Monday, lifting both New York and London contracts to multi-month highs. Data cited by analysts pointed to shrinking global supply prospects, with investors focused on weather-driven production risks in Europe, Brazil, India and the potential for El Niño-linked rainfall disruptions.
Key takeaways
- New York October world sugar added modestly, rising to a 10-month nearest-futures high, while London ICE white sugar moved higher to a 15-month high.
- The main catalyst was renewed concern over lower global sugar production tied to drought and heat, plus expectations for tighter supplies in 2026/27.
- With multiple bearish forecasts for the next marketing year and continued weather uncertainty, traders are treating supply risks as the dominant driver of the complex.
- Recent reports on monsoon conditions in India and Brazil’s mid-year production trend reinforced the supply narrative.
What drove the move
Prices gained as market participants increasingly priced in tighter availability of sugar into the next marketing year, supported by a cluster of production and weather updates.
Europe and the UK: According to S&P Global Energy, sugar production in the European Union and the UK is expected to fall to 14.98 million metric tons (MMT) this year, the lowest level in 11 years, citing drought and hot weather.
Brazil’s output trend: Brazil remains central to global supply. Unica reported last Thursday that Brazil Center-South June sugar production declined 26.3% year over year to 3.903 MMT. Analysts have linked the outlook to the broader decision-making of mills that can shift between sugar and ethanol production, which becomes more pronounced when crude prices rise.
Weather risks in India: The Indian Meteorological Department said monsoon rainfall for August and September “will likely be below normal,” and India’s Earth Science Ministry warned this year’s monsoon could be the weakest in 11 years. India is the second-largest sugar producing country globally, making crop assumptions a key swing factor for the sugar market.
El Niño concerns: Additional support came from expectations that El Niño could curb rainfall across major producing regions. The US Climate Prediction Center said the El Niño pattern developing across the equatorial Pacific is likely to be among the strongest in more than 75 years. The forecast matters because it could affect Brazil, India and Thailand—the three largest sugar producing regions.
More near-term evidence also surfaced: on Monday, India’s Meteorological Department reported cumulative monsoon rainfall was 12% below normal as of August 10, though improved from 42% below normal on June 30.
Forecasts turning bearish for 2026/27
The rally was also tied to evolving balance-sheet expectations for 2026/27. Multiple firms reduced surplus estimates or increased projected deficits, reinforcing the market’s focus on tight future supplies.
Covrig Analytics said it now expects a global sugar deficit for 2026/27 of 300,000 metric tons, compared with a prior June forecast for a 100,000 metric tons surplus. Green Pool Commodity Specialists raised its 2026/27 deficit outlook to 3.3 MMT from a June estimate of 1.76 MMT. StoneX increased its projected 2026/27 global deficit to 1.7 MMT from a May estimate of 550,000 metric tons.
Traders also pointed to earlier adjustments in the market balance. Czarnikow cut its global 2026/27 sugar balance estimate from a surplus of 1.4 MMT to a deficit of 100,000 metric tons, citing factors including Brazil’s ethanol-focused production during the recent crude price surge tied to the US-Iran war.
Context from major agency and industry forecasts
The current wave of upside momentum builds on a backdrop of mixed production expectations across the largest producers.
In April, Brazil’s government-backed agency Conab forecast 2026/27 Brazilian sugar output would decline 0.5% to 43.952 MMT, while ethanol output was expected to rise 7.2% year over year to 29.259 million liters.
For India, the Indian Sugar and Bio-energy Manufacturers Association (ISMA) revised its 2025/26 forecast in April to 32 MMT. ISMA also projected 2025/26 sugar exports at 800,000 metric tons, noting that India has operated a quota system for sugar exports since 2022/23 after late rains affected production and domestic supplies. Meanwhile, the USDA said in April it expects a 2026/27 India surplus of 2.5 MMT—the first surplus in two years.
On the global supply-demand picture, the International Sugar Organization (ISO) forecast a record 2025/26 global sugar crop of 182 MMT and a return to surplus for that year. For 2026/27, however, ISO projected production would fall 1.15% year over year to 180 MMT and that a global deficit of 262,000 metric tons could emerge, citing possible El Niño effects on harvests in India and Thailand.
The USDA, in its May projections, anticipated 2026/27 global sugar production would drop 6.5% year over year to 184.854 MMT and that global human sugar consumption would increase 0.4% year over year to 179.991 MMT. The USDA also forecast global ending stocks would rise to 44.410 MMT.
Market reaction and what investors are watching next
With the week’s gains driving New York sugar to a 10-month nearest-futures high and London white sugar to a 15-month high, the market signal is that supply risk is outweighing near-term balance expectations. The rally appears increasingly anchored to weather forecasts and production updates from major exporters and processors, particularly as traders weigh how quickly conditions in India and other key regions could tighten the physical picture.
Investors will likely monitor upcoming confirmations on monsoon performance and any further revisions to 2026/27 production and deficit forecasts from major commodity models. Additional updates from Brazil’s production data and ongoing signals on El Niño development could also influence the direction of the complex in the days ahead.
