Sugar futures rebounded for a third straight session on Monday, with July New York sugar closing higher at its highest level in three weeks and August London ICE white sugar ending at a near-10-month high. The rally was driven by fresh concerns about weaker-than-expected monsoon rainfall in India, a key global producer, after government forecasts warned the upcoming monsoon could be the weakest in 11 years.
At the same time, the market continued to weigh offsetting forces, including production shifts in Brazil toward ethanol as well as earlier improvements in global shipping conditions tied to the reopening of the Strait of Hormuz and a stronger U.S. dollar. Still, investors leaned toward tightening supply expectations as El Niño risks build across major sugar-growing regions.
Key takeaways
- Price move: July NY world sugar #11 finished up +0.31 (about +2.22%), and Aug ICE white sugar #5 rose +9.60 (about +2.07%).
- Catalyst: Rainfall shortfalls in India and warnings that the monsoon could be the weakest in 11 years renewed fears of lower sugarcane yields.
- Production context: Brazil’s mills have been redirecting more sugarcane toward ethanol, reducing sugar output and affecting global balance estimates.
- Macro/FX factors: A stronger dollar previously pressured prices, but Monday’s supply-focused narrative outweighed the currency headwind.
- Implication: Ongoing weather risk linked to El Niño is sustaining the bid for both U.S. and London contracts.
What drove the move
India’s monsoon outlook took center stage after the India Meteorological Department reported cumulative monsoon rainfall at 42% below normal as of June 29. The Earth Science Ministry also cautioned that this year’s monsoon could be the weakest in 11 years. India’s monsoon season runs from June through September, directly influencing sugarcane growth and ultimately harvest sizes.
Traders also focused on El Niño formation and the potential for drier conditions in several major sugar-producing areas. According to Japan’s Meteorological Agency, an El Niño pattern has formed across the equatorial Pacific. The emergence of El Niño is expected to reduce rainfall in Brazil, India, and Thailand—three of the world’s largest sugar-growing regions.
Additional weather probabilities reinforced the risk premium. The U.S. National Oceanic and Atmospheric Administration (NOAA) estimated a 67% probability of a “Super El Niño” this year, described as the strongest ever recorded. Separately, India’s weather office lowered its cumulative rainfall forecast for the June-September monsoon window to 90% of the long-term average, down from a 92% level projected earlier.
Market reaction and what offset the rally
Despite Monday’s strength, the prior backdrop included factors that had weighed on sugar earlier. On Monday’s lead-in, New York sugar had slipped to a two-month low as the reopening of the Strait of Hormuz eased disruption concerns. In theory, a more stable shipping environment can reduce costs for global importers by lowering shipping rates, insurance expenses, and fuel prices.
Currency dynamics also mattered. Recent strength in the U.S. dollar weighed on sugar prices after the dollar index rose to a 13-month high on Wednesday. A stronger dollar tends to make dollar-priced commodities more expensive for buyers using other currencies, often dampening demand at the margin.
Still, supply-risk drivers appeared to dominate on Monday, with the market trading as if weather-driven harvest downside is more likely than earlier expectations.
Brazil’s ethanol shift and balance-sheet updates
Brazil-related data added a second layer of support. According to a report from Unica, Brazil’s Center-South sugar production through May for the 2026/27 season totaled 6.838 million metric tons, down 2.0% year over year. Unica also reported that the share of sugarcane used for sugar fell to 41.42% from 50.09% as mills increased ethanol production, with the share of cane directed to ethanol rising to 58.38% from 49.91% in the prior year.
Meanwhile, market attention extended to global supply-demand assessments. Sugar trader Czarnikow, as cited in the article, 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 after taking into account Brazil’s tendency to produce more ethanol than sugar amid recent crude oil price strength.
Bigger picture: forecasts diverge across seasons
While near-term weather risk has pressured expectations to the downside, longer-range forecasts remain mixed. The International Sugar Organization (ISO) projected a record global sugar crop for the 2025/26 season and raised its surplus outlook, citing production growth. For the following 2026/27 season, however, ISO forecast production would fall and a global deficit would emerge, explicitly linking the outlook to possible impacts from an El Niño pattern on harvests in India and Thailand.
Other forecasters cited in the article pointed to different magnitudes of deficits and surpluses, underscoring uncertainty around the weather path and conversion of cane into sugar versus ethanol. For India, guidance also continues to evolve with policy and yield expectations, including an export quota system introduced after late rain in earlier seasons limited domestic supplies.
For investors, Monday’s rebound suggests the market is currently prioritizing weather-driven supply risks over the recent relief from shipping concerns and the earlier dollar headwind. With El Niño probabilities still rising and monsoon rainfall forecasts remaining below normal, traders will likely continue to reprice risk as new rainfall data and agricultural updates arrive.
What to watch next: Continued updates to India monsoon rainfall estimates and any revisions to El Niño intensity could influence sugar futures quickly. Investors will also look for further Brazil Center-South production and mill allocation data, along with additional changes to global balance forecasts from major agencies and traders.
