Raw sugar prices extended gains for a second session on Tuesday, with October New York sugar contracts rising to a 16.75-month high and October London ICE white sugar climbing to a one-week high. The rally was driven by tightening supply expectations and a shifting global outlook toward a deficit in the 2026/27 season.
International Sugar Organization forecasts of a smaller surplus in 2025/26 and a turn to a 200,000 metric ton deficit in 2026/27 helped anchor bullish sentiment, alongside additional research pointing to lower output prospects in major producing regions.
Key takeaways
- Price move: October New York sugar rose 2.02% and October London ICE white sugar advanced 1.39%.
- Catalyst: Market focus is on a tightening balance sheet, with the International Sugar Organization projecting a 200,000 MT deficit for 2026/27 after a small surplus for 2025/26.
- Output risks: Forecast downgrades for production in parts of the EU and expectations of adverse weather tied to El Niño are supporting the bid.
- Positioning: COT data showed funds building long positions in London white sugar, which can amplify price swings if liquidation follows.
- Policy and demand signals: India’s potential for tax-free raw sugar imports and ongoing concerns over monsoon rainfall are adding uncertainty to near-term supply flows.
What drove the move
The upturn in sugar futures aligns with expectations for a tighter global market. According to the International Sugar Organization, the world balance is expected to shift from a projected +1.1 million metric ton surplus in 2025/26 to a -200,000 metric ton deficit in 2026/27.
Other market watchers reinforced the deficit narrative. Green Pool Commodity Specialists projected the 2026/27 global deficit at -3.2 million metric tons and reduced its 2025/26 surplus estimate to 4.85 million metric tons from a prior July view of 4.93 million metric tons. The European Union’s Sugar Market Observatory also pointed to lower EU output for 2026/27, forecasting a 19% year-on-year decline to 13.4 million metric tons.
Earlier in the cycle, Covrig Analytics and StoneX both adjusted their 2026/27 outlooks in the direction of a larger shortfall. Covrig Analytics said it now expects a global deficit of -300,000 MT, reversing a June forecast that leaned toward a surplus. StoneX, meanwhile, raised its deficit forecast to -1.7 million metric tons, attributing part of the broader supply dynamic to Brazil where sugar mills may favor more ethanol production amid higher crude prices.
Market reaction and positioning factors
The rally also reflects how positioning can influence futures volatility. According to the weekly Commitment of Traders data for the week ended Aug. 25, funds increased their net-long positions in London ICE white sugar by 2,830, bringing holdings to a record 70,766 net-long positions—the highest since reporting began in 2011. Such positioning can increase the likelihood of accelerated moves if new information challenges the bullish setup.
On the fundamental side, weather-driven supply risk remains central. Concerns that an El Niño pattern could reduce rainfall across major producing regions are viewed as price supportive. Data cited from the US Climate Prediction Center indicated that the developing El Niño event could be among the strongest in more than 75 years, raising the risk of disruptions in Brazil, India, and Thailand.
Regional developments adding to tightness concerns
India’s monsoon outlook has come back into focus. India’s Meteorological Department reported that cumulative monsoon rainfall from June through September was 13% below normal as of Sep. 2, though it improved from 42% below normal on June 30. The Indian Earth Science Ministry has warned the monsoon could be the weakest in 11 years—an important signal given India’s position as the world’s second-largest sugar producer.
India has also taken steps that could affect global flows. On Aug. 20, the Directorate General of Foreign Trade said it will allow up to 1 million metric tons of raw sugar imports free of taxes until Oct. 31. The policy is being interpreted as another sign of potential supply strain, particularly because India is typically a net exporter and imported in large volumes during the 2017-18 season.
Elsewhere, production risk is being flagged for Europe and the UK. S&P Global Energy data cited in the report indicated that sugar output is set to drop to 14.98 million metric tons this year, the lowest in 11 years, due to drought and hot weather.
In Brazil, which is the world’s largest producer, the bullish impulse is tied to weaker sugar output. UNICA data cited in the article showed Brazil Center-South June sugar production fell 26.3% year-on-year to 3.903 million metric tons.
Bigger picture: deficit forecasts and expectations for 2025/26 vs. 2026/27
While forecasts remain mixed across organizations, the direction of travel has been consistent: tighter expectations for 2026/27 are supporting prices today. The International Sugar Organization projected 2025/26 global production at 182 million metric tons, up 3.5% year-on-year, and a surplus of 1.1 million metric tons—down from a May view of 2.2 million metric tons after a deficit in 2024/25.
For 2026/27, ISO projected global production to fall 1% year-on-year to 180.1 million metric tons, with a deficit of 200,000 MT, citing potential El Niño impacts on harvests in India and Thailand. Other forecasts cited in the report show a range of outcomes, including StoneX’s deficit view and Covrig Analytics’ revised balance estimate.
The US Department of Agriculture’s biannual framework, referenced in the article, also points to lower year-on-year production for 2026/27, with global output projected to decline to 184.854 million metric tons and ending stocks rising modestly to 44.410 million metric tons.
Going forward, traders are likely to watch weather updates tied to El Niño, progress on India’s monsoon and import policy decisions, and any further revisions to Brazil’s crop and EU/UK production outlooks. With the market already leaning into deficit scenarios for 2026/27, additional supply data could determine whether the current rally consolidates or accelerates.
