The Outlook for a Smaller Global Surplus Boosts Sugar Prices

May NY world sugar #11 (SBK26) today is up +0.21 (+1.58%), and Aug London ICE white sugar #5 (SWQ26) is up +6.90 (+1.67%).Sugar prices are climbing today on signs of a smaller global sugar surplus. Sugar trader Czarnikow cut its 2026/27 global sugar surplus estimate today to 1.1 MMT from 3.4 MMT in February, and cut its 2025/26 surplus estimate to 5.8 MT from 8.3 MMT. Don’t Miss a Day: From crude oil to coffee, sign up free for Barchart’s best-in-class commodity analysis.Today's +5% jump in crude oil sugar prices (CLK26) is supportive for sugar. Higher crude prices boost ethanol prices and could prompt the world's sugar mills to divert more cane crushing toward ethanol production rather than sugar, thus curbing sugar supplies.Sugar prices also have some support amid concerns over supply disruptions from the closure of the Strait of Hormuz. According to Covrig Analytics, the closure of the strait has curbed approximately 6% of the world's sugar trade, constraining refined sugar output.Sugar prices have been under pressure for the past three weeks, with NY sugar falling to a 5.5-year low in the nearest futures contract last Friday amid expectations of abundant global supplies and tepid demand. Last Wednesday's expiration of the May London sugar contract saw 472,650 MT of deliveries to settle the contract, the most for a May contract in 14 years, a sign of tepid sugar demand. Higher sugar production in Brazil is bearish for sugar prices. On March 27, Unica reported that cumulative 2025-26 Center-South sugar output (October through mid-March) rose +0.7% y/y to 40.25 MMT, with sugar mills boosting the amount of cane crushed for sugar to 50.61% from 48.08% last year. On Friday, Conab, Brazil's government forecasting agency, said that it expects 2025/26 Brazil sugar production of 44.196 MMT, up +0.1% y/y.Sugar prices also took a hit earlier this month when India's Food Secretary said the government has no plans to ban sugar exports this year, easing concerns that it could divert more sugar to make ethanol following the Iran war disruption to crude oil supplies. On February 13, India's government approved an additional 500,000 MT of sugar for export for the 2025/26 season, on top of the 1.5 MMT approved in November. India introduced a quota system for sugar exports in 2022/23 after late rain reduced production and limited domestic supplies. India's National Federation of Cooperative Sugar Factories Ltd. reported last Thursday that India's 2025-26 sugar production from Oct 1-Apr 15 was up +7.7% y/y to 27.48 MMT. On March 11, the Indian Sugar and Bio-energy Manufacturers Association (ISMA) projected India's 2025/26 sugar production at 29.3 MMT, up 12% y/y, below an earlier projection of 30.95 MMT. The ISMA also cut its estimate for sugar used for ethanol production in India to 3.4 MMT from a July forecast of 5 MMT, which may allow India to boost its sugar exports. India is the world's second-largest sugar producer. The International Sugar Organization (ISO) on February 27 forecasted a +1.22 MMT (million metric ton) sugar surplus in 2025-26, following a -3.46 MMT deficit in 2024-25. ISO said the surplus is being driven by increased sugar production in India, Thailand, and Pakistan. ISO is forecasting a +3.0% y/y rise in global sugar production to 181.3 million MMT in 2025-26. The USDA, in its bi-annual report released on December 16, projected that global 2025/26 sugar production would climb +4.6% y/y to a record 189.318 MMT and that global 2025/26 human sugar consumption would increase +1.4% y/y to a record 177.921 MMT. The USDA also forecast that 2025/26 global sugar ending stocks would fall by -2.9% y/y to 41.188 MMT. The USDA's Foreign Agricultural Service (FAS) predicted that Brazil's 2025/26 sugar production would rise by 2.3% y/y to a record 44.7 MMT. FAS also predicted that India's 2025/26 sugar production would increase by 25% y/y to 35.25 MMT, driven by favorable monsoon rains and increased sugar acreage. In addition, FAS predicted that Thailand's 2025/26 sugar production will increase by +2% y/y to 10.25 MMT. On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.