Sugar futures hit multi-month highs amid fears of declining production in Europe, Brazil, and India, as drought and El Niño conditions threaten to tighten the market further.
Sugar futures climbed to multi-month highs on Friday as traders priced in mounting concerns over tighter global supplies, with New York’s October contract rising 5.65% and London’s white sugar contract gaining 3.39%. The move left both benchmarks at their strongest levels in months, reflecting a market that has shifted sharply towards caution as crop risks build across several major producing regions.
The pressure starts in Europe, where S&P Global Energy now expects sugar output in the European Union and the UK to fall to 14.98 million metric tons this year, the lowest level in 11 years. Analysts have pointed to drought and prolonged heat as the main reasons for the decline, adding to worries that the Northern Hemisphere’s biggest consuming markets will face less domestic supply than previously expected.
Brazil has added another layer of strain. According to Unica, output in the Centre-South region fell 26.3% year on year in June to 3.903 million metric tons, while growers and mills continue to balance sugar against ethanol production. S&P Global Energy reported in June that India and Brazil are increasingly diverting cane towards fuel amid stronger energy prices, a shift that reduces the volume available for the sweetener market and helps explain why several forecasters have turned more bearish on global supply.
Forecasts have moved quickly. Czarnikow cut its 2026/27 balance from a surplus of 1.4 million metric tons to a deficit of 100,000 tonnes, while Covrig Analytics now expects a deficit of 300,000 tonnes after previously seeing a modest surplus. Green Pool Commodity Specialists raised its deficit estimate to 3.3 million tonnes from 1.76 million, and StoneX lifted its projection to 1.7 million tonnes from 550,000 tonnes. At the same time, the International Sugar Organisation still sees a surplus in 2025/26, but says the following season could swing to a deficit as El Niño risks grow in India and Thailand.
India, the world’s second-largest sugar producer, is emerging as the next key swing factor. The India Meteorological Department has warned that monsoon rainfall in August and September is likely to be below normal, while the Earth Science Ministry said cumulative rainfall was running 11% below average as of August 7. The US Climate Prediction Centre has also said the developing El Niño could become one of the strongest in more than 75 years, a pattern that typically brings drier conditions to Brazil, India and Thailand. The US Department of Agriculture has already projected weaker 2026/27 output in Brazil and Thailand, even as it expects India’s production to improve if rainfall and acreage recover. Taken together, the latest forecasts suggest the sugar market is entering the new season with far less buffer than it had only a few months ago.
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