Crude Oil Prices Push Sugar Prices Upward
The global sugar market is experiencing a shift, with key factors driving price dynamics and creating complex price movements.
- Increased Sugar Production:
- Brazil and India are projected to increase sugar output significantly in the 2025/26 season. Brazil's sugar production is expected to reach record highs, with some reports citing production rising by around 2.3% year-on-year to about 44.7 million metric tons (MMT). India is expected to have a sharp rise, possibly 25% higher than last year, due to favorable monsoon rains and expanded sugar acreage.
- Globally, the USDA forecasts a record 189.318 MMT of sugar production in 2025/26, up 4.7% from the previous year. Ending sugar stocks are expected to increase by 7.5% to 41.188 MMT, suggesting a surplus market environment.
- Impact of Crude Oil Prices:
- Rising crude oil prices influence sugar mills' decisions to produce more ethanol (a biofuel made from sugarcane) rather than sugar. This can limit sugar supply and provide some price support despite the growing production.
- Conversely, if mills prioritize crushing for sugar over ethanol, as seen recently in Brazil where 54% of cane was crushed for sugar, the increased sugar availability can exert downward pressure on prices.
- Weather Conditions:
- Weather plays a crucial role, with Brazil experiencing favorable dry conditions encouraging sugar production, while drought and heat previously reduced yields.
- India’s early monsoon onset has improved crop expectations, supporting larger production forecasts.
- Export Policies and Demand:
- India’s government decision to allow sugar mills to export 1 MMT of sugar aims to ease export restrictions and increase supply to global markets, which can weigh on prices.
- Demand factors include China's surge in sugar imports (up 1,435% in June 2025) and Coca-Cola’s decision to use cane sugar in US products, potentially increasing domestic consumption by 4.4%.
Potential Impact on Sugar Prices:
- The expected global sugar surplus and higher ending stocks tend to exert downward pressure on prices, creating a bearish market environment.
- However, rising crude oil prices and ethanol incentives along with export restrictions or adverse weather conditions can support prices by limiting sugar availability.
- Price volatility is likely to continue as these opposing forces interact: while increased production and favorable weather predict lower prices, energy market dynamics and demand shifts provide counterbalance.
In summary, the sugar market in mid-2025 is influenced by substantial increases in production in Brazil and India alongside notable demand growth in China and the US. Despite these demand increases, the large projected global sugar surplus and higher stock levels point toward a generally bearish price trend, moderated by crude oil price movements and ethanol production decisions.
- While the global sugar market shows a potential bearish trend due to increased production and higher stock levels, the decision to produce more ethanol from crude oil could limit sugar supply, providing some price support.
- In addition to the growing sugar production and the potential surplus, demand factors such as China's increased sugar imports and Coca-Cola's shift to using cane sugar in US products could push domestic consumption higher, potentially counteracting the downward pressure on prices.
