Sugar prices declined on Wednesday, driven by improving monsoon rains in India and heavy liquidation ahead of a London white sugar contract expiry. October NY world sugar #11 (SBV26) closed down 0.03 cents (-0.20%), while August London ICE white sugar #5 (SWQ26) plunged 14.20 dollars (-3.06%) to a 2.5-week low.
Monsoon Recovery Eases Supply Fears
India's Meteorological Department reported Wednesday that cumulative monsoon rainfall was 23% below normal as of July 15, a sharp improvement from 42% below normal on June 30. The stronger rains reduce the risk of a poor sugarcane harvest in the world's second-largest sugar producer, which had previously driven a sharp rally. Sugar prices had surged over the past three weeks, with NY sugar hitting a two-month high and London sugar reaching a 10.25-month high last week.
Fund Liquidation Compounds Losses
London sugar fell sharply as commodity funds liquidated positions ahead of Thursday's last trading day for the August ICE white sugar contract. Funds had built record net-long positions of 58,131 contracts in London white sugar as of July 7, according to last Friday's Commitment of Traders data. Such excessive long positioning can amplify downside moves when unwinding.
Global Production Outlook Remains Uncertain
Despite the near-term pressure, multiple factors continue to support a tighter global sugar balance. Brazil's Center-South sugar production through May was 6.838 million metric tons, down 2.0% year-on-year, as mills diverted more cane to ethanol amid rising crude oil prices. The percentage of sugarcane used for sugar dropped to 41.42% from 50.09% a year earlier. Sugar trader Czarnikow cut its 2026/27 global balance estimate from a surplus of 1.4 million tons to a deficit of 100,000 tons in June.
Weather risks also persist. The US Climate Prediction Center warned last week that the current El Niño could become one of the strongest in over 75 years, threatening rainfall in Brazil, India, and Thailand. India's weather office lowered its monsoon rainfall forecast to 90% of the long-term average, down from 92% forecast in April.
Mixed Forecasts from Industry Bodies
Looking ahead, the International Sugar Organization forecasts a record global sugar crop of 182 million tons in 2025/26, but projects a deficit of 262,000 tons in 2026/27 due to El Niño impacts. The USDA expects global 2026/27 production to fall 6.5% year-on-year to 184.854 million tons, with India's output rising 12% to 33.6 million tons but Thailand's falling 15.6% to 9.5 million tons. Brazil's production is seen declining 3.0% to 42.5 million tons.
On the demand side, the USDA projects global human sugar consumption to reach a record 179.991 million tons in 2026/27, up 0.4% year-on-year. Ending stocks are expected to rise 2.0% to 44.410 million tons.