North Weekly
ATU Images | The Image Bank | Getty Images Sugar is getting a lot less sweet for buyers. Sugar prices surged 21.5% in August, marking its strongest monthly gain since October 2010, when it rose 24%. The United Nation's Food and Agriculture Organization Food Price Index also rose in August amid broad-based increases, led by sugar.
"The surge reflected expectations of lower sugar beet yields in the European Union due to adverse weather, concerns over the impact of El Niño on production prospects in key producing countries in Asia, lower sugar production in Brazil, and India's announcement of duty-free raw sugar imports," the organization said in its recent report. The August rally pushed sugar futures ahead of the S&P 500 on a year-to-date basis. The sweetener is now up about 20% in 2026, versus the nearly 13% advance for the broad market index.
The U.N.'s Food and Agriculture Organization points out that the sugar rally is tied to several factors, collectively pushing prices up. William Osnato, Barchart director of commodity data research and analysis, noted that a summer heat wave damaged Europe's sugar-beet crop, significantly affecting production. "That's been factored in over the last month.
So a bunch of organizations lowered their production estimates," Osnato said. Different organizations have slashed production estimates or increased deficit estimates. The European Commission's latest sugar balance sheet estimates a decline in EU production of 19% to 13.4 million metric tons in the 2026/27 marketing year, from 16.6 million tons in 2025/26.
Citi projected a world deficit of 1.3 million metric tons, and Green Pool Commodity Specialists estimated 3.2 million metric tons. "They're all going in the same direction," Osnato said. Citi analysts called sugar a "highest-conviction bullish" market among agricultural commodities.
The bank raised its price target to 19 cents per pound over three months, citing tightening inventories, India's unexpected import program, and deteriorating weather in India, Thailand, and the EU. El Niño threatens upcoming harvests. Osnato said it is likely "the biggest forward-looking concern." Brazil, India, and Thailand together account for approximately 70% of global sugar exports.
Goldman Sachs noted drought during the growing season could lower cane yields, while excessive rainfall during harvest could interrupt fieldwork and reduce sugar content. The Climate Brink's multi-model median forecast shows the temperature anomaly for the Niño 3.4 region in the Pacific Ocean peaking near 3.9 degrees Celsius in November. India has faced below-normal rainfall in key sugar-producing regions, depleting reservoirs and discouraging sugarcane planting.
Unusually warm Pacific Ocean temperatures are expected to bring erratic rainfall and water shortages across Thailand. Higher energy prices are also making ethanol more attractive relative to sugar in Brazil, where mills can shift cane between the two products. "When the price of oil increases, countries producing ethanol from sugar have a higher incentive to produce more ethanol and export less sugar to the global market," Rob Johansson, director of economics and policy analysis at the American Sugar Alliance, told CNBC.
With oil prices over $90 a barrel, Brazil is producing more biofuel, lowering sugar availability and putting upward pressure on prices. Brazil alone accounts for roughly half of world sugar exports. Brazilian mills can shift production mix between sugar and ethanol depending on profitability.
A weaker corn crop due to El Niño-related droughts may divert more sugarcane into ethanol production, leaving less sugar available for export. Rain has also delayed harvesting in Brazil, with some production potentially recovered once fields dry. India, the world's second-largest sugar producer, recently authorized 1 million metric tons of duty-free raw-sugar imports to bolster domestic availability amid lower production, seasonal demand, and rising prices.
This move follows two disappointing crops and is significant as it was India's first import authorization since the 2017-2018 season. Even if India imports only about half the authorized amount, it reinforces the view that supplies are tighter than previously estimated. Brazil remains the market's key balancing supplier, but weather-related execution risks during the remainder of the harvest leave little margin for error.
Source: CNBC
