Sugar prices rise on dollar weakness and short covering
Weakness in the US dollar triggered short covering in futures, lifting prices on Thursday. Market sentiment is being weighed between ample global supplies and risks from El Niño weather patterns and geopolitical supply constraints.
Global sugar prices recorded a modest gain on Thursday, with July NY world sugar #11 (SBN26) closing up 0.21% and August London ICE white sugar #5 (SWQ26) rising 0.99%. The recovery from early losses was primarily driven by weakness in the US dollar, which spurred short covering in sugar futures. This upward movement occurred despite broader bearish fundamentals, including ample global supplies and rising production in key exporting nations.
The price recovery followed an initial dip linked to a 3% decline in crude oil prices. Lower crude prices reduce the profitability of ethanol, potentially incentivising sugar mills to divert more cane crushing towards sugar production rather than ethanol, thereby boosting sugar supplies. Last Wednesday, Unica reported that Brazil’s 2026/27 sugar production in April rose 55.3% year-on-year to 2.475 million metric tonnes, supported by higher yields. Additionally, Thailand’s sugar exports for January to April 2026 increased 29% year-on-year to 1.6 million metric tonnes, further adding to the surplus.
Despite these supply-side pressures, prices found support from concerns that El Niño conditions could disrupt production in major growing regions. The US National Oceanic and Atmospheric Administration estimates an 82% probability of El Niño conditions emerging between May and July, with a 67% chance of a “Super El Niño” persisting through the end of the year. Such conditions are expected to curb rainfall in Brazil, India, and Thailand, the world’s three largest sugar-producing regions.
India’s weather office recently revised its cumulative rainfall estimate for the June to September monsoon season down to 90% of the long-term average, a decrease from the 92% forecast issued in April. Meanwhile, the International Sugar Organization has forecast a record global sugar crop for the 2025/26 season but anticipates a shift for the following year. The ISO projects global sugar production will fall by 1.15% year-on-year to 180 million metric tonnes for 2026/27, citing the potential impact of El Niño on harvests in India and Thailand.
Supply constraints have also been exacerbated by geopolitical factors, specifically the closure of the Strait of Hormuz. Covrig Analytics estimates that this closure has curtailed approximately 6% of global sugar trade, constraining refined sugar output. While the USDA and other bodies have projected surpluses for the current season, the convergence of weather risks and logistical bottlenecks has provided a floor for prices in the near term.
