Sugar Prices Finish Higher on Dollar Weakness and Poor Brazilian Cane Quality

Sugar prices rose sharply Wednesday, driven by a weaker dollar and fund short-covering, amplified by Unica's report of reduced sugar production in Brazil due to prioritizing ethanol. This contrasts with recent expectations of a global sugar surplus for 2025/26, projected by Datagro and StoneX at +1.53 MMT and +3.74 MMT, respectively, following a 2024/25 deficit of -4.67 MMT; conflicting factors like increased production forecasts in India and Thailand versus reduced output in Brazil and revised deficit forecasts from the ISO create uncertainty in the sugar market outlook.

Analysis

Sugar markets experienced a notable upswing, with July NY world sugar #11 (SBN25) climbing +2.08% and August London ICE white sugar #5 (SWQ25) rising +2.18% on Wednesday, driven primarily by a weakening U.S. dollar that spurred fund short covering, and amplified by Unica's report that poor Brazilian cane quality is diverting more cane to ethanol, thereby curbing sugar output. This short-term rally contrasts sharply with recent forecasts projecting a global sugar surplus for 2025/26, with Datagro estimating +1.53 MMT and StoneX +3.74 MMT, a significant recovery from the anticipated 2024/25 deficit of -4.67 MMT. The market is currently grappling with highly divergent supply signals from key producers: Brazil faces reduced current output, with Unica reporting a -38.6% y/y drop in April Center-South production and Conab forecasting a -3.4% y/y fall for the 2024/25 crop due to adverse weather, yet some forecasts like Conab's for 2025/26 suggest a +4.0% y/y production increase. Conversely, India's outlook is mixed, with the USDA FAS predicting a +26% y/y surge in 2025/26 production to 35 MMT on favorable monsoons, while ISMA projects a -17.5% y/y decline for 2024/25 to a 5-year low of 26.2 MMT and reports current season output down -17%. Thailand offers a more positive supply signal with a +14% y/y increase in 2024/25 production to 10.00 MMT. This complex picture is mirrored in global balance estimates, where the International Sugar Organization (ISO) has revised its 2024/25 global deficit forecast upwards to a 9-year high of -5.47 MMT, while the USDA's earlier projection pointed to record 2024/25 global production, underscoring the profound uncertainty influencing sugar prices.

Key Decisions for Investors

• Given the conflicting supply forecasts and recent price volatility, investors should exercise caution with new long-term directional bets until a clearer global production outlook materializes.
• Closely monitor near-term catalysts such as Brazilian harvest progress and ethanol parity, Indian monsoon developments, and updated production estimates from key agencies like Unica, ISMA, and the ISO.
• Factor in the impact of currency movements, particularly the US dollar, on sugar futures pricing, alongside ongoing assessment of export policies in key producing nations like India.