The increase in crude oil is driving up the price of sugar

May NY World Sugar #11 (SBK26) is up +0.10 (+0.70%) today, and May London ICE White Sugar #5 (SWK26) is up +0.50 (+0.12%).

Sugar prices rose today but remained below Monday’s 2-month high. A +8% rise in crude oil prices today (CLJ26) supports sugar. High crude oil prices are supporting ethanol prices, prompting the world’s sugar mills to shift from sugarcane crushing to ethanol production, thereby reducing sugar supply.

On February 12, sugar prices fell to 5.25-year near-term lows on concerns that the world sugar glut will continue. On February 11, analysts at sugar trader Czarniko said they expected a global sugar addition of 3.4 MMT in the 2026/27 crop year, after a surplus of 8.3 MMT in 2025/26. Also, Greenpool Commodity Specialists said on January 29 that they expect a global sugar surplus of 2.74 MMT for 2025/26 and a surplus of 156,000 MT for 2026/27. Meanwhile, StoneX said on February 13 that it expects a global sugar surplus of 2.9 MMT in 2025/26.

The International Sugar Organization (ISO) on February 27 forecast a sugar surplus of +1.22 MMT (million metric tons) in 2025-26, after a deficit of -3.46 MMT in 2024-25. The additional surplus is due to increased sugar production in India, Thailand and Pakistan, the ISO said. ISO forecasts world sugar production to increase +3.0% y/y to 181.3 million MMT in 2025-26.

Signs of lower sugar production in Brazil are supporting sugar prices, after Unica reported on February 18 that sugar production in central-south Brazil fell 36% y/y to just 5,000 MT in the second half of January. However, aggregate Central-South sugar output rose +0.9% y/y to 40.24 MMT in January 2025-26.

The Indian Sugar and Bioenergy Manufacturers Association (ISMA) reported on March 6 that India’s 2025-26 sugar production rose +12% y/y to 24.75 MMT from October 1 to February 28. Last Wednesday, ISMA estimated India’s 2025/26 sugar production at 29.3 MMT, up 12% y/y, down from the previous estimate of 30.95 MMT. The ISMA also cut its estimate of sugar used for ethanol production in India to 3.4 MMT from the July 5 MMT forecast, which may allow India to boost its sugar exports. India is the second largest producer of sugar in the world.

Sugar prices have fallen amid prospects for higher Indian sugar exports. On February 13, the Indian government approved an additional 500,000 MT of sugar for export for the 2025/26 season, up from the 1.5 MMT approved in November. India has introduced a quota system for sugar exports in 2022/23 after late rains reduced production and constrained domestic supplies.

The USDA, in its biennial report released on December 16, forecast that world 2025/26 sugar production will increase +4.6% y/y to a record 189.318 MMT and that 2025/26 global human consumption of sugar will increase +1.4% y/y to a record 177.9218 MMT. The USDA has also forecast that world sugar ending stocks will fall by -2.9% y/y to 41.188 MMT in 2025/26. USDA’s Foreign Agricultural Service (FAS) has forecast Brazil’s 2025/26 sugar production to rise 2.3% y/y to a record 44.7 MMT. The FAS also forecast India’s 2025/26 sugar production to increase by 25% y/y to 35.25 MMT, due to favorable monsoon rains and increased sugar production. Furthermore, FAS forecast that Thailand’s 2025/26 sugar production will grow +2% y/y to 10.25 MMT.

As of the date of publication, Amir Espland had no positions (either directly or indirectly) in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com