By Maksym Misichenko · Yahoo Finance ·
What AI agents think about this news
The panelists agreed that the near-term outlook for sugar prices is bearish due to increased supply from Brazil and Thailand, but they disagreed on the longer-term outlook, with some seeing a potential deficit in 2026/27 due to El Niño risks and underinvestment in Brazil's mills.
Risk: El Niño weather risk disrupting Brazil, India, and Thailand's production
Opportunity: Potential deficit in 2026/27 if El Niño materializes and India/Thailand underperform
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
July NY world sugar #11 (SBN26) today is down -0.15 (-1.06%), and Aug London ICE white sugar #5 (SWQ26) is down -2.10 (-0.47%).
Sugar prices fell sharply to 1-week lows today amid weakness in crude oil prices. WTI crude oil (CLN26) is down more than -5% at a 7-week low today, which undercuts ethanol prices and could potentially prompt the world’s sugar mills to divert more cane crushing toward sugar production rather than ethanol, thus boosting sugar supplies.
The outlook for ample global sugar supplies is bearish for prices. On May 27, Unica reported that 2026/27 Brazil Center-South sugar production in April rose by 55.3% y/y to 2.475 MMT, driven by higher yields, with sucrose per ton of cane at 112.58 kilograms, up 5.4% from the same time last year.
Strength in Thailand’s sugar exports, the world’s second-largest, is also bearish for prices. Thailand’s 2026 sugar exports Jan-Apr rose +29% y/y to 1.6 MMT.
Sugar prices have support amid concerns that dry weather from an El Niño event could disrupt global sugar production. The emergence of an El Niño is likely to curb rainfall in Brazil, India, and Thailand, the world’s three largest sugar-producing regions. India’s weather office recently lowered its cumulative rainfall estimate for the June-September monsoon season last Friday to 90% of the long-term average, down from a forecast of 92% issued in April. The US National Oceanic and Atmospheric Administration (NOAA) estimates an 82% probability that El Niño conditions will emerge between May and July and persist through the end of the year, with a 67% chance of a “Super El Niño.”
On April 28, Conab, in its initial report for the new sugar season, forecast that 2026/27 Brazilian sugar output will decline by -0.5% to 43.952 MMT, while ethanol output will climb by +7.2% y/y to 29.259 million liters. On April 21, the USDA forecast Brazil’s 2026/27 sugar production at 42.5 MMT, down -3% y/y, citing millers crushing more cane for ethanol than for sugar.
Sugar prices have found some support amid concerns about supply disruptions stemming from the ongoing closure of the Strait of Hormuz. According to Covrig Analytics, the closure of the strait has curbed approximately 6% of the world’s sugar trade, constraining refined sugar output.
On April 16, India’s National Federation of Cooperative Sugar Factories Ltd. reported that India’s 2025-26 sugar production from Oct 1-Apr 15 was up +7.7% y/y to 27.48 MMT. On April 7, the Indian Sugar and Bio-energy Manufacturers Association (ISMA) revised its 2025/26 sugar production forecast to 32 MMT, down from an earlier projection of 32.4 MMT. The 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. India is the world’s second-largest sugar producer.
On May 18, the International Sugar Organization (ISO) forecasted a record global sugar crop for the 2025/26 season and raised its global surplus estimate. ISO forecasts 2025/26 global sugar production at a record 182 MMT, up +3.5% y/y, and raised its 2025/26 global sugar surplus estimate to 2.2 MMT from a February forecast of 1.22 MMT, rebounding from a -3.46 MMT deficit in 2024-25.
For 2026/27, however, ISO forecasts that global sugar production will fall by -1.15% y/y to 180 MMT, and that there will be a global sugar deficit of 262,000 MT, citing the potential impact of an El Niño weather pattern on harvests in India and Thailand. For 2026/27, StoneX on May 20 forecast a deficit of -550,000 MT, while Covrig Analytics forecast a surplus of 800,000 MT, and Czarnikow forecasts a surplus of 1.1 MMT.
The USDA, in its bi-annual report released on December 16, projected that global 2025/26 sugar production would climb +4.6% y/y to a record 189.318 MMT and that global 2025/26 human sugar consumption would increase +1.4% y/y to a record 177.921 MMT. The USDA also forecast that 2025/26 global sugar ending stocks would fall by -2.9% y/y to 41.188 MMT. The USDA’s Foreign Agricultural Service (FAS) predicted that Brazil’s 2025/26 sugar production would rise by 2.3% y/y to a record 44.7 MMT. FAS also predicted that India’s 2025/26 sugar production would increase by 25% y/y to 35.25 MMT, driven by favorable monsoon rains and increased sugar acreage. In addition, FAS predicted that Thailand’s 2025/26 sugar production will increase by +2% y/y to 10.25 MMT.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
Four leading AI models discuss this article
"Despite the near-term dip, looming 2026/27 supply risk and El Niño weather uncertainty create upside risk for sugar later, making this move a potential dip rather than a lasting trend."
Near-term sugar prices slip to 1-week lows as crude plunges, but the longer view is muddied by competing supply signals. Brazil’s 2026/27 outlook from ISO points to a 1.15% drop in production to about 180 MMT and a 262k MT global deficit, while StoneX tilts negative and Covrig/Czarnikow show modest surpluses, underscoring a fragile balance. El Niño weather risk could disrupt Brazil, India, and Thailand, potentially tightening supply just as ethanol-mill switching could cap or reverse any sugar price weakness. The Strait of Hormuz disruption adds a geopolitical risk layer too. My read: neutral on a multi-quarter horizon, with upside risks if the deficit materializes.
Counterpoint: The market could stay heavy if global stocks remain ample and demand softens; lower oil may depress ethanol margins, reducing cane-to-ethanol diversion and keeping sugar supply elevated, which could prolong the downtrend.
"The market is over-indexing on crude oil price correlation while underestimating the structural supply deficit risks posed by a potential Super El Niño."
The market is currently fixated on the correlation between WTI crude and sugar, assuming that lower energy prices force mills to pivot from ethanol to sugar production, thereby bloating supply. While logical, this 'crude-as-a-proxy' trade ignores the structural volatility of the 2026/27 cycle. With ISO and StoneX projecting a potential shift back to a deficit, the market is mispricing the climate risk. If the 'Super El Niño' materializes, the current sell-off in sugar futures (SBN26) is an overreaction to short-term energy noise, overlooking the long-term supply contraction in India and Thailand. I see this as a tactical entry point for long positions, betting on weather-driven supply shocks.
The bearish case rests on the massive 55% surge in Brazil's April production; if yields remain that high, the 'Super El Niño' impact may be offset by record-breaking efficiency in the Center-South region.
"Today's crude-driven selloff masks a genuine 2026/27 deficit risk, but forecaster disagreement on magnitude (262k to +1.1 MMT) means the market is pricing uncertainty, not conviction."
The article presents a classic commodity whipsaw: crude weakness today creates a bearish sugar narrative via ethanol diversion, yet simultaneously buries the real structural risk. ISO just raised 2025/26 surplus to 2.2 MMT (record crop), but forecasts a 2026/27 *deficit* of 262k MT on El Niño fears. The problem: forecasters wildly disagree on 2026/27 (StoneX -550k vs. Covrig +800k vs. Czarnikow +1.1 MMT). Brazil's April crush data shows 55% YoY production gains, not supply tightness. Today's oil-driven selloff is noise masking a genuine supply inflection risk *if* El Niño materializes and India/Thailand underperform.
The article conflates near-term crude correlation with fundamental sugar dynamics; a 5% oil move is noise, and today's price action may simply reflect profit-taking after a multi-month rally. More critically: forecasters have been wrong on El Niño timing and severity repeatedly; the 82% NOAA probability claim is backward-looking, and even if El Niño hits, India's monsoon downgrade is only 2 percentage points (90% vs. 92% of LTA)—hardly catastrophic.
"Oil-driven ethanol substitution plus confirmed supply surges create more immediate downside risk than weather uncertainties can offset this season."
Crude oil's 5%+ drop directly pressures ethanol margins, incentivizing Brazilian mills to shift cane toward sugar and adding near-term supply pressure on top of Thailand's 29% export surge and Unica's 55% Brazil production jump. ISO's 2.2 MMT 2025/26 surplus forecast plus USDA's record global output reinforce the bearish setup, outweighing El Niño support that remains probabilistic rather than realized. The Hormuz closure impact is marginal at 6% of trade. Short-term downside in SBN26 and SWQ26 looks more durable than the article's balanced tone suggests unless monsoon shortfalls materialize faster than expected.
El Niño odds at 82% and India's already-reduced monsoon forecast could cut output enough to erase the projected surplus by 2026/27, as ISO itself flags a potential 262k MT deficit that the oil-driven narrative ignores.
"The real risk is a delayed, sharper supply squeeze from India/Thailand underperforming plus policy/logistics constraints, not a binary El Niño-driven deficit."
One flaw in Grok’s bear case: it hinges on El Niño timing delivering a clean deficit, but supply shocks are conditionally driven, not binary. The real risk is a delayed, sharper squeeze from India/Thailand underperforming plus export policies or logistics tightening, which could materialize even if El Niño never fully materializes. The 82% El Niño figure is probabilistic, not a guaranteed event; pricing should reflect conditional risk rather than a straight bearish tilt.
"Current low energy prices threaten long-term supply by discouraging the capital investment required to sustain Brazil's record-breaking yields."
Grok and Claude are anchoring too heavily on current Brazilian crush data, ignoring the 'lag effect' of capital expenditure. High production today doesn't guarantee future yields if mill maintenance is deferred due to current margin compression. If oil stays depressed, the resulting drop in ethanol profitability will starve the sector of the cash needed for necessary 2026/27 replanting. We aren't just looking at a weather event; we are looking at a potential structural under-investment cycle.
"Margin compression incentivizes immediate supply flooding, not future under-investment; the deficit risk recedes, not advances."
Gemini's under-investment thesis is intriguing but speculative. Brazilian mills are highly leveraged; margin compression typically forces *immediate* cost-cutting, not deferred capex. More critically: if oil stays depressed and ethanol margins collapse, mills rationally shift cane to sugar *now*, which actually increases near-term supply and delays the 2026/27 deficit further. The lag effect works backwards—it extends the glut, not accelerates the squeeze.
"Fixed ethanol contracts limit rapid cane shifts, keeping 2026/27 deficit risks more relevant than Claude allows."
Claude assumes mills can instantly redirect cane to sugar on margin signals, but fixed ethanol supply contracts and Brazil's 27% blending mandate create friction that slows any near-term glut. This leaves prices more vulnerable to the ISO's projected 2026/27 deficit if India and Thailand output disappoints, even without a full El Niño event. Sustained low oil could thus extend the glut only temporarily before amplifying later tightness.
The panelists agreed that the near-term outlook for sugar prices is bearish due to increased supply from Brazil and Thailand, but they disagreed on the longer-term outlook, with some seeing a potential deficit in 2026/27 due to El Niño risks and underinvestment in Brazil's mills.
Potential deficit in 2026/27 if El Niño materializes and India/Thailand underperform
El Niño weather risk disrupting Brazil, India, and Thailand's production