Dollar Weakness Induces Short Covering in Sugar Futures

March NY world sugar #11 (SBH27) is up +0.08 (+0.44%) today, and December London ICE white sugar #5 (SWZ26) is up +8.40 (+1.67%).

Sugar prices are moving higher today as dollar weakness ($DXY) has induced short covering in sugar futures. 

Last Friday, NY sugar fell to a 5-week low, and London sugar dropped to a 3-month low on signs of stronger Indian sugar production, which will boost global supplies.  India’s Sugar & Bio-Energy Manufacturers Association (ISMA) reported Saturday that India’s sugar production in the 2026/27 season (Oct 1-Nov 5) climbed to 1.29 MMT, up nearly fourfold from 320,000 MT a year earlier.   As many as 184 sugar mills were crushing sugarcane on November 5, versus 154 a year ago.  India is the world’s second-largest sugar producer.

Sugar prices are also weighed down by concerns about Brazilian exporter sales when the Brazilian real (^USDBRL) tumbled to a 10.5-month low against the dollar late last month after President Luiz Inacio Lula da Silva’s surprise victory in the Brazilian presidential election.

The drop in the Brazilian real encourages exporters to sell more sugar, as they can get a higher dollar price for their sales.  Brazil is the world’s largest sugar producer, accounting for about 23% of world sugar production and more than 50% of world sugar exports, according to the USDA.

Persistent El Nino rainfall in Brazil has slowed harvesting and cane crushing, a positive for prices. Brazilian mills crushed 32 MMT of sugarcane in the first half of October, down -18% from 39 MMT in the comparable year-earlier period.  The ministry reported that Brazilian sugar production in the first half of October fell -23% y/y to 2.15 MMT. 

Sugar has support after Covrig Analytics on October 27 raised its global sugar deficit estimate for 2026/27 to 490,000 MT from its August forecast of 300,000 MT.  Covrig also tightened its 2025/26 balance to a smaller surplus of 1.2 MMT from 5.2 MMT due to lower Brazilian sugar production and larger sugar imports by India.

Sugar prices have support from the developing Super-El Niño in the Pacific Ocean, which could disrupt rainfall in Brazil, India, and Thailand, the world’s three largest sugar-producing regions, thus cutting world sugar production.  India’s rainfall during the recent monsoon season (June-Sep) was 12.6% below normal, the weakest in 11 years.

On August 20, India’s Directorate General of Foreign Trade said it would allow up to 1 MMT of raw sugar imports into the country tax-free until October 31, and on October 22 announced an extension to December 31. The move further signals the supply strain facing the global sugar market, as India is usually a sugar exporter and last imported sugar in substantial volumes during the 2017-18 season.

In a supportive factor for sugar prices, the International Sugar Organization (ISO) forecasts that global sugar production in 2026/27 will fall by -1% y/y to 180.1 MMT, causing a global sugar deficit of -200,000 MT, due to the potential negative impact of the El Niño weather pattern on harvests in India and Thailand.

Looking farther ahead, Czarnikow on August 14 predicted a 2027/28 global sugar deficit of -2.9 MMT as Brazil’s sugar mills produce more ethanol than sugar amid the recent surge in crude oil prices from the US-Iran war.  The group forecasts that 2027/28 global sugar production will fall -0.7% yr/yr to 177 MMT, driven mainly by weather disruptions in India, the EU, and Thailand.

The tighter forecasts for 2026/27 and 2027/28 follow a record year for sugar in 2025/26.  ISO pegs 2025/26 global sugar production at a record 182 MMT, up +3.5% y/y, and a 2025/26 global sugar surplus of 1.1 MMT. 

The USDA, in its biannual report released in May, projected that global 2026/27 sugar production would fall by -6.5% y/y to 184.854 MMT from a record 186.056 MMT in 2025/26.  Global 2026/27 human sugar consumption is expected to increase +0.4% y/y to a record 179.991 MMT.  The USDA also forecasts that 2026/27 global sugar ending stocks would increase by +2.0% y/y to 44.410 MMT.  The USDA’s Foreign Agricultural Service (FAS) predicted that Brazil’s 2026/27 sugar production would fall by -2.5% y/y to 42.2 MMT.  FAS predicted that India’s 2026/27 sugar production would fall by -1.7% y/y to 29.5 MMT, and that Thailand’s 2026/76 sugar production would fall by -15.6% y/y to 9.5 MMT.

On the date of publication, Rich Asplund did not directly have a position 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.