The Plunge in Crude Oil Undercuts Sugar Prices

July NY world sugar #11 (SBN25) Monday closed down -0.06 (-0.37%), and August London ICE white sugar #5 (SWQ25) closed down -7.60 (-1.60%).

Sugar prices on Monday gave up an early advance and closed lower after a -7% plunge in crude prices (CLQ25) sparked long liquidation in sugar futures.  Lower crude prices undercut ethanol prices and may prompt the world’s sugar mills to divert cane crushing toward sugar production rather than ethanol, thus boosting sugar supplies.

Sugar prices have fallen over the past three months and posted 4-year nearest-futures lows last Wednesday due to expectations of a global sugar surplus.  On May 22, the USDA, in its biannual report, projected that global 2025/26 sugar production would increase by +4.7% year-over-year (y/y) to a record 189.318 million metric tons (MMT), with a global sugar surplus of 41.188 MMT, up 7.5% year-over-year.

The outlook for higher sugar production in India, the world’s second-largest producer, is bearish for prices.  On June 2, India’s National Federation of Cooperative Sugar Factories projected that India’s 2025/26 sugar production would climb +19% y/y to 35 MMT, citing larger planted cane acreage.  The outlook for abundant rainfall in India could lead to a bumper sugar crop, which is bearish for prices.  On April 15, India’s Ministry of Earth Sciences projected an above-normal monsoon this year, with total rainfall forecast to be 105% of the long-term average.  India’s monsoon season runs from June through September.

Signs of larger global sugar output are negative for prices.  On May 22, the USDA’s Foreign Agricultural Service (FAS) predicted that Brazil’s 2025/26 sugar production would rise +2.3% y/y to a record 44.7 MMT.  Also, India’s 2025/26 sugar production is projected to rise +25% y/y to 35.3 MMT, citing favorable monsoon rains and increased sugar acreage.  In addition, Thailand’s 2025/26 sugar production is expected to climb +2% y/y to 10.3 MMT.

In a bearish factor, the Indian government said on January 20 that it would allow its sugar mills to export 1 MMT of sugar this season, easing the restrictions placed on sugar exports in 2023.  India has restricted sugar exports since October 2023 to maintain adequate domestic supplies.  India allowed mills to export only 6.1 MMT of sugar during the 2022/23 season to September 30 after allowing exports of a record 11.1 MMT in the previous season.  However, the ISMA projects that India’s 2024/25 sugar production will fall -17.5% y/y to a 5-year low of 26.2 MMT.  Also, the ISMA reported last Monday that India’s sugar production from Oct 1-May 15 was 25.74 MMT, down -17% from the same period last year.  In addition, Indian Food Secretary Chopra said on May 1 that India’s 2024/25 sugar exports may only total 800,000 MT, below earlier expectations of 1 MMT.