Sugar prices fell on Wednesday as improved monsoon rains in India eased concerns about a poor harvest. October NY world sugar #11 (SBV26) declined 0.05 cents (-0.34%), while August London ICE white sugar #5 (SWQ26) dropped 15.00 dollars (-3.24%) to a 2.5-week low. The improvement in India's cumulative monsoon rainfall to 23% below normal on July 15 from 42% below normal on June 30 reduced fears of a weak sugarcane crop.
Monsoon Improvement and Fund Positioning
India's Meteorological Department reported that cumulative monsoon rainfall as of July 15 was 23% below normal, a significant improvement from the 42% deficit recorded on June 30. This development weighed on sugar prices, as earlier concerns about weak monsoon rains had driven prices to multi-month highs last week. The rally had been fueled by worries that poor rainfall would lower sugar yields in India, the world's second-largest sugar producer.
However, the price downturn could be exacerbated by an excessively long position in London ICE sugar held by funds. According to last Friday's Commitment of Traders (COT) data, funds increased their net-long positions in ICE London white sugar by 10,368 contracts in the week ended July 7, reaching a record 58,131 net-long positions (data from 2011). This crowded trade makes prices vulnerable to sharp corrections.
Brazil's Shift to Ethanol and Global Supply Concerns
On the bullish side, Unica reported on June 22 that Brazil Center-South sugar production through May 2026/27 was 6.838 million metric tons, down 2.0% year-over-year, as millers prioritized ethanol production. The percentage of sugarcane used for sugar dropped to 41.42% from 50.09%, while cane crushing for ethanol rose to 58.38% from 49.91%. This shift was driven by rising crude oil prices, which made ethanol more profitable. Sugar trader Czarnikow 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, citing Brazil's increased ethanol output.
Concerns about El Niño also support prices. The US Climate Prediction Center warned that the El Niño weather pattern that emerged last month could be one of the strongest in over 75 years, potentially curbing rainfall in Brazil, India, and Thailand—the world's three largest sugar-producing regions. India's weather office lowered its cumulative rainfall estimate for the June-September monsoon season to 90% of the long-term average, down from a forecast of 92% issued in April.
Production Forecasts and Surplus Estimates
Several agencies have released conflicting forecasts for the 2026/27 season. The International Sugar Organization (ISO) forecasts global sugar production will fall 1.15% year-over-year to 180 million metric tons, with a deficit of 262,000 metric tons, citing El Niño's potential impact on India and Thailand. StoneX forecasts a deficit of 550,000 metric tons, while Covrig Analytics cut its surplus forecast to 100,000 metric tons from 380,000 metric tons.
The USDA, in its biannual report, projects global 2026/27 sugar production will decline 6.5% year-over-year to 184.854 million metric tons from a record 186.056 million metric tons in 2025/26. Global consumption is expected to rise 0.4% to a record 179.991 million metric tons. The USDA's Foreign Agricultural Service (FAS) predicts Brazil's production will fall 3.0% to 42.5 million metric tons, while India's output will increase 12% to 33.6 million metric tons due to favorable monsoon rains and increased acreage. Thailand's production is expected to drop 15.6% to 9.5 million metric tons.
For the 2025/26 season, the ISO forecasts a record global sugar crop of 182 million metric tons, up 3.5% year-over-year, with a surplus of 2.2 million metric tons, rebounding from a deficit of 3.46 million metric tons in 2024/25. This surplus, combined with improved Indian monsoon rains, is currently weighing on prices.