11 February 2026

Global Sugar Market in Transition: Surplus Outlook, Shifting Ethanol Dynamics, and Weather‑Driven Uncertainty

Raw sugar prices fluctuated within a relatively narrow range over the last three-month period. Despite occasional macro‑supportive factors, including stronger energy markets and a firmer Brazilian currency, sugar futures repeatedly struggled to sustain any upward momentum. Heavy producer selling consistently capped attempts to break above the 15.00 cts/lb[BJ2]  level. Large speculative short positioning, and generally good development of Northern hemisphere crops have also maintained downward pressure on sugar prices. The market ultimately slipped below important technical support levels during the last day of January, with white sugar prices mirroring the weaker tone and pushing the white premium to unusually subdued levels. However, the market remains in an indecisive pattern with fundamentals being reevaluated during the Dubai conferences. Meanwhile, the exceptional high premium of ethanol over sugar in Brazil is leading to revisions in the expected sugar production for the coming 2026 campaign. In terms of weather , after a dry spell since mid‑December in Brazili’s main cane-growing regions, forecasts now indicate a return of rainfall, which should help ease dryness concerns.

Brazil’s ethanol advantage shifts cane allocation

Brazil remained a central driver of global sentiment. The Center-South campaign approached completion with a sugar production of 40.2 million tons, supported by a crush of just over 600 million tons of cane. However, the allocation between sugar and ethanol shifted markedly toward ethanol during the period. Strengthening hydrous ethanol prices widened the sugar-ethanol arbitrage and encouraged mills to divert more cane towards biofuel production. These favourable ethanol economics also increase the likelihood of mills starting the new campaign earlier than usual to capture elevated hydrous prices before a widely anticipated correction as corn‑based ethanol production ramps up around June. Forward expectations point towards a sizeable 2026 cane crop near 620 million tons, although the sugar mix may continue to decline if ethanol maintains its pricing advantage.‑South campaign approached completion with ‑ethanol arbitrage and encouraged mills to divert more cane toward biofuel. These favorable ethanol economics also increase the likelihood of mills starting the new campaign earlier than usual to capture elevated hydrous prices before.

Strong start in India as early crush lifts output

India delivered one of the strongest early-season performances in years. The cane crush began early and accelerated quickly, with production running well ahead of last season. High recovery rates and widespread mill operation contributed to a significant year-on-year increase in output. Despite the government authorising 1.5 million tons of exports, actual shipments have remained limited, as domestic prices, equivalent to levels near 18 cts/lb[BJ5] , offer a far more attractive outlet for mills. The announcement of a longawaited increase in the domestic minimum selling price has not been confirmed yet, but would certainly reduce even more the attractiveness of exports, limiting the actual sugar supply to the world market. ‑season performances in years. The cane crush began early and accelerated quickly, with production running well ahead of last season. High recovery rates and widespread mill operation contributed to a significant year‑on‑year increase in output. Despite the government authorizing 1.5 million tons of exports, actual shipments remained limited, as domestic prices‑awaited increase in the domestic minimum selling price.

Thailand’s recovery shows regional strains and structural challenges

Thailand exhibits more mixed and structurally concerning signals. The harvest campaign is now in full swing, rapidly catching up after a slow start, with daily milling now similar to last year. However, the recovery masks significant regional disparities: Eastern regions are experiencing labor shortages, particularly near the Cambodian border, while northern regions are facing widespread outbreaks of White Cane Leaf Disease, which affects the availability and quality of cane. Some farmers, particularly in diseaseaffected regions, chose to remove compromised cane fields and switch to cassava. The allocation of cane to ethanol production is also increasing more rapidly than previously anticipated. ‑affected regions, chose to remove compromised cane fields and switch to cassava.

Global balance turns to surplus while inventories stay tight and funds hold large shorts

The global sugar market has shifted from a deficit into a surplus environment. Despite this transition into surplus, global sugar stocks remain historically low relative to consumption, with only modest rebuilding projected over the next two years. This makes the current low-price environment difficult to justify purely on fundamentals, as tight inventories would normally provide stronger price support. A major factor suppressing prices is the positioning of speculative participants, who have accumulated their largest net short exposure over the last five years. Any shift in this positioning could trigger significant price volatility, should funds decide to start covering their sold positions.‑short exposure over.