Sugar prices hit multi-year lows in mid-February before recovering modestly, with the rebound linked in part to a sharp rise in crude oil prices following Iran’s closure of the Strait of Hormuz. The Sugar No. 11 (Raw) price stood at $13.93/lb as of 3 March, while the Sugar No. 5 (White) was at $414/mt as of 17 February.

The bearish fundamental backdrop nonetheless remains intact: a well-established global surplus for 2025/26 is shared across most major forecasters, though estimates vary considerably in scale. The divergence reflects differing assumptions on Indian production volumes, Brazilian mill allocation between sugar and ethanol, and the pace of demand recovery.

European beet: acreage caution and pest pressure

In Europe, early acreage indications point to a reduction in beet plantings for the coming season. At least one major German producer has indicated a 5% reduction, a more conservative estimate than some peers have projected. The final outcome is likely to be highly sensitive to weather through March.

Flooding across parts of Europe has complicated winter wheat growing, creating replanting pressure that adds uncertainty to broader planting decisions. Soil moisture levels across the beet belt remain below the long-term average but are tracking last year’s profile, which delivered historically high yields.

Mild winter temperatures have also raised pest pressure concerns. Aphid larvae populations may not have been reduced sufficiently, as lethal temperature thresholds — between minus 6 and minus 10 Celsius — were not consistently reached. Cosun reported a final beet price of €40/t for 2025, down from €47.25 in 2024.

No progress has been made on suspending Inward Processing Relief (IPR), leaving import routes open at a time when a strong euro and weak world prices continue to favour import competitiveness.

Brazil: crude oil adds an ethanol variable

The 2025/26 Brazilian campaign processed 601.6 million metric tonnes (MMT) of cane through mid-January, down 2.2% year-on-year. Sugar production reached 40.2 MMT, up 0.9%, supported by a higher allocation of 50.7% versus 48.1% in the prior season.

For 2026/27, crushing is projected to recover to around 620 MMT. Iran’s closure of the Strait of Hormuz pushed crude prices up as much as 13%, briefly exceeding $82/barrel, which has supported ethanol competitiveness against gasoline in Brazil. Whether this translates into a meaningful shift in mill mix will depend on whether Petrobras passes through international price increases to the domestic fuel market. Full-season sugar allocation is projected at 48.5%, yielding 40.0–40.5 MMT, though a further price decline could compress allocation toward the 35% range last seen in 2018/19–2019/20.

Brazil’s export pace has been strong: in the first 13 working days of February, exports reached 376,500 tonnes, up 33% from the same period last year.

India: production higher, but exports face structural barriers

Season-to-date Indian sugar production has risen 12% to 24.63 MMT, supported by stronger cane availability and improved recovery rates. Full-season output is estimated at 28.5 MMT, a 2.5 MMT year-on-year increase. Despite an expanded export quota of 2 MMT, execution remains well behind target: only 201,000 tonnes have been shipped.

Indian sugar is currently quoted at around $450/t FOB, compared with competing origins closer to $400/t — a $50/t pricing gap that quota expansions alone cannot close. Tightening import policies in the Philippines, Indonesia, and China are narrowing export outlets further.

2026/27 outlook: rebalancing possible, execution uncertain

For 2026/27, most forecasters expect the surplus to narrow, with some projections pointing toward a market approaching balance. The rebalancing thesis rests on European acreage reductions of up to 10%, a shift in Brazilian mill allocation toward ethanol if prices remain depressed, and constrained Indian exports. However, execution risk is significant across all three factors, and the pace of rebalancing remains highly uncertain.

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