October NY world sugar #11 (SBV26) closed up +0.55 (+3.09%) on Tuesday, and October London ICE white sugar #5 (SWV26) closed up +19.60 (+3.81%).

Sugar prices settled sharply higher on Tuesday after the International Sugar Organization (ISO) projected a global sugar deficit.  ISO on Tuesday projected a 2026/27 global sugar deficit of -200,000 MT after a projected +1.1 MMT surplus for 2025/26. 

Sugar prices have rallied sharply over the past month, with NY sugar posting a 16.5-month high last Friday and London sugar posting a 17-month high on Aug 20. 

The European Union’s Sugar Market Observatory said last Thursday that EU 2026/27 sugar production is expected to drop -19% y/y to 13.4 MMT.  Also, Green Pool Commodity Specialists last Thursday projected a 2026/27 global sugar deficit of -3.2 MMT and cut its global 2025/25 sugar surplus estimate to 4.85 MMT from a July estimate of 4.93 MMT. 

On August 3, Covrig Analytics said it now expects a global sugar deficit in 2026/27 of -300,000 MT, compared to a June forecast for a +100,00 MT surplus.  Meanwhile, StoneX on July 28 raised its 2026/27 global sugar deficit forecast to -1.7 MMT from a May estimate of -550,000 MT.  Sugar trader Czarnikow on June 11 cut its global 2026/27 sugar balance estimate from a surplus of 1.4 MMT to a deficit of -100,000 MT, as Brazil’s sugar mills produce more ethanol than sugar amid the recent surge in crude oil prices from the US-Iran war.

An excessively long position by funds in London sugar could exacerbate any long liquidation pressures. Last Friday’s weekly Commitment of Traders (COT) data showed funds boosted their long positions in London ICE white sugar by 2,830 net-long positions in the week ended Aug 25 to a record 70,766, the most since data began in 2011.

India’s Meteorological Department reported on Monday that India’s cumulative monsoon rainfall (June-Sep) was 14% below normal as of August 31, although it had substantially improved from 42% below normal on June 30.  On July 31, India’s Meteorological Department said that monsoon rainfall in India during August and September “will likely be below normal.”  India’s Earth Science Ministry has warned that this year’s monsoon in India could be the weakest in 11 years.  India’s monsoon season runs from June through September. India is the world’s second-largest sugar-producing country. 

On August 20, India’s Directorate General of Foreign Trade said it will allow up to 1 MMT of raw sugar imports into the country free of any taxes until October 31. The move is a further sign of 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.

Due to drought and hot weather in Europe, sugar production in the European Union and the UK is set to decline to 14.98 MMT this year, the lowest level in 11 years, according to data from S&P Global Energy.  On August 14, Czarnikow predicted a 2027/28 global sugar deficit of -2.9 MMT due to lower sugar cane and sugar beet plantings.  The group forecast 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.

Lower sugar output in Brazil is bullish for sugar prices after Unica reported on August 6 that Brazil Center-South June sugar production fell -26.3% y/y to 3.903 MMT.  Brazil is the world’s largest sugar-producing country.

Concerns that dry weather from an El Niño event could disrupt global sugar production are bullish for prices.  The emergence of an El Niño is likely to curb rainfall in Brazil, India, and Thailand, the world’s three largest sugar-producing regions.  On July 8, the US Climate Prediction Center said the El Niño weather pattern that emerged across the equatorial Pacific last month will likely be one of the strongest in more than 75 years. 

On April 7, the Indian Sugar and Bio-energy Manufacturers Association (ISMA) revised its 2025/26 India sugar production forecast to 32 MMT, down from an earlier projection of 32.4 MMT.  ISMA also projects India’s 2025/26 sugar exports of 800,000 MT.  India introduced a quota system for sugar exports in 2022/23 after late rain reduced production and limited domestic supplies. Meanwhile, the USDA on April 30 said it expects a 2026/27 sugar surplus in India of 2.5 MMT, the first surplus in two years.

The International Sugar Organization (ISO) projects a record global sugar crop for the 2025/26 season and a global sugar surplus.  ISO forecasts 2025/26 global sugar production at a record 182 MMT, up +3.5% y/y, and projects a 2025/26 global sugar surplus estimate of 1.1 MMT, down from a May forecast of 2.2 MMT, rebounding from a -3.46 MMT deficit in 2024-25. 

For 2026/27, however, ISO forecasts global sugar production to fall by -1% y/y to 180.1 MMT, with a global sugar deficit of -200,000 MT, citing the potential impact of an El Niño weather pattern on harvests in India and Thailand.  For 2026/27, StoneX on August 18 raised its forecast to a global sugar deficit of 1.7 MMT from a May estimate of -550,000 MT, while Covrig Analytics cut its surplus forecast to 100,000 MT from a May estimate of 380,000 MT.

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 -3.0% y/y to 42.5 MMT.  FAS predicted that India’s 2026/27 sugar production would increase by +12% y/y to 33.6 MMT, driven by favorable monsoon rains and increased sugar acreage.  FAS predicted that Thailand’s 2026/76 sugar production will fall by -15.6% y/y to 9.5 MMT.