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Sugar is getting rather a lot much less candy for patrons.
Sugar costs surged 21.5% in August, marking its strongest month-to-month achieve since October 2010, when it rose 24%. The United Nation’s Meals and Agriculture Group Meals Worth Index additionally rose in August amid broad-based will increase, led by sugar.
“The surge mirrored expectations of decrease sugar beet yields within the European Union on account of antagonistic climate, considerations over the affect of El Niño on manufacturing prospects in key producing international locations in Asia, decrease sugar manufacturing in Brazil, and India’s announcement of duty-free uncooked sugar imports,” the group mentioned in its current report.
The August rally pushed sugar futures forward of the S&P 500 on a year-to-date foundation. The sweetener is now up about 20% in 2026, versus the almost 13% advance for the broad market index.
The U.N.’s Meals and Agriculture Group factors out that the sugar rally is tied to a number of elements, that are collectively pushing the costs available in the market.
The sugar rally displays a shift in expectations about world provide, in accordance with William Osnato, Barchart director of commodity information analysis and evaluation. Osnato informed CNBC that the injury to Europe’s sugar-beet crop throughout a summer time warmth wave was one of many largest rapid elements.
Sugar beets are grown in the identical locations and across the similar time as corn and wheat, and so the warmth wave can considerably have an effect on sugar manufacturing.
“That is been factored in during the last month. So a bunch of organizations lowered their manufacturing estimates,” Osnato mentioned.
Completely different organizations have both slashed manufacturing estimates or elevated deficit estimates of their current studies. The European Fee’s newest sugar steadiness sheet estimates a decline in EU manufacturing of 19% to 13.4 million metric tons, within the 2026/27 advertising and marketing yr, from 16.6 million tons in 2025/26. Citi projected a world deficit of 1.3 million metric tons in a Tuesday notice, and Inexperienced Pool Commodity Specialists estimated 3.2 million metric tons.
“What’s often constant is that they are all moving into the identical course,” Osnato mentioned. “They’re all growing the deficit.”
Within the notice, Citi analysts referred to as sugar a “highest-conviction bullish” market amongst agricultural commodities traded on the Intercontinental Trade. The financial institution raised its value goal to 19 cents per pound over three months, citing tightening inventories, India’s sudden import program and deteriorating climate in India, Thailand and the EU.
El Niño threatens upcoming harvests
Osnato mentioned that El Niño, a worldwide local weather sample that may convey hotter ocean temperatures and extreme climate, is probably going “the most important forward-looking concern.”
A probably excessive El Niño intensifies the stress on sugar costs.
Brazil, India and Thailand collectively account for roughly 70% of world sugar exports. Goldman Sachs mentioned in a notice that drought throughout the rising season might decrease cane yields, whereas extreme rainfall throughout harvest might interrupt fieldwork and scale back the sugar content material of cane. The Local weather Brink’s multi-model median forecast exhibits the temperature anomaly for the Niño 3.4 area within the Pacific Ocean peaking close to 3.9 levels Celsius — or about 39 levels Fahrenheit — in November. That is nicely above the two levels Celsius, or 35.6 levels Fahrenheit, threshold for a really robust El Niño.
India has confronted below-normal rainfall in key sugar-producing areas. A weak monsoon can deplete reservoirs, discouraging many farmers from planting water-intensive sugarcane for the next season. Additional, unusually heat Pacific Ocean temperatures are anticipated to convey erratic rainfall and water shortages throughout Thailand.
Brazil’s ethanol pivot and India’s sugar imports
Greater power costs are additionally making ethanol extra enticing relative to sugar in Brazil, the place mills can shift cane between the 2 merchandise.
“When the worth of oil will increase, international locations that produce ethanol from sugar have the next incentive to supply extra ethanol and export much less sugar to the worldwide market,” Rob Johansson, director of economics and coverage evaluation on the American Sugar Alliance informed CNBC in an e-mail. “With oil costs over $90 a barrel, international locations like Brazil, which closely subsidizes its ethanol business, are producing extra biofuel, reducing the quantity of sugar out there available on the market and placing upward stress on costs,” Johansson mentioned.
Brazil alone accounts for roughly half of world sugar exports. Brazilian mills can sometimes shift their manufacturing combine between sugar and ethanol, relying on which is extra worthwhile.
In keeping with Goldman Sachs’ evaluation, as a result of corn is a vital feedstock for ethanol manufacturing alongside sugarcane, a weaker corn crop on account of El Niño-related droughts could divert extra sugarcane into ethanol manufacturing, leaving much less sugar out there for export.
Rain has additionally delayed harvesting in Brazil, Osnato mentioned. Some manufacturing might be recovered as soon as fields dry, making a rebound in Brazilian sugar content material or quicker harvesting one of many clearest draw back dangers to costs.
India, the world’s second-largest sugar producer behind Brazil, not too long ago approved 1 million metric tons of duty-free raw-sugar imports. The Indian authorities mentioned the choice was supposed to bolster home availability amid decrease manufacturing, seasonal demand and rising costs. With India proscribing exports whereas getting into the market as a purchaser, much less sugar might be out there to different importing international locations.
Osnato mentioned the choice adopted two disappointing crops and is important as a result of it was India’s first import authorization because the 2017-2018 season. Even when India imports solely about half the approved quantity, he mentioned, the transfer reinforces the view that provides are tighter than beforehand estimated.
“Brazil stays the market’s key balancing provider, however weather-related execution dangers throughout the the rest of the harvest depart little margin for error,” Citi analyst Arkady Gevorkyan wrote in a notice.
— CNBC’s Nick Wells contributed reporting.
