Sugar Prices Under Pressure as Huge London Deliveries Hit Demand, While Global Supply Deficit Risks Grow

Today Markets Analysis: Sugar futures are showing mixed performance after falling to 1.5-week lows, with the market caught between evidence of weak physical demand and a growing body of longer-term supply concerns. October NY World Sugar #11 recovered to finish slightly higher, while December London white sugar remained under pressure.

October NY World Sugar #11 closed at 17.57 cents per pound, up 0.03 points, or 0.17%, while December London white sugar fell 2.30 points to $521.80 per tonne, down 0.44%.

The immediate pressure is being driven by unusually large deliveries against the expired October London contract, a stronger US dollar and heavy commodity-fund positioning. However, forecasts for tighter global supplies in 2026/27, lower production expectations in Thailand and Brazil, and weather risks across major producing regions continue to provide an important bullish counterweight.

Sugar Futures Show Mixed Performance

The two major sugar contracts moved in different directions on Wednesday, reflecting contrasting near-term conditions across the NY raw sugar and London white sugar markets.

The divergence between the contracts comes as the London market absorbs a very large physical delivery against the October contract, while longer-term traders continue to assess forecasts for a potential global deficit.

Bullish Sentiment

Several fundamental factors continue to provide potential support for sugar prices:

• The International Sugar Organization projects a 2026/27 global deficit of 200,000 tonnes, reversing from its projected 1.1 million-tonne surplus for 2025/26.
• Thailand’s 2026/27 sugar production is expected to decline sharply, with the Thai Sugar Millers Corp projecting output of around 10 MMT, down 17% year on year.
• StoneX has forecast a much larger 1.7 MMT global deficit for 2026/27, compared with its earlier 550,000-tonne deficit estimate.
• Brazilian sugar production has been under pressure, with Unica reporting Center-South June production down 26.3% year on year to 3.903 MMT.
• India has authorised up to 1 MMT of raw sugar imports without taxes through October 31, an unusual move for a country that is normally a significant sugar exporter.
• Weather risk remains significant, particularly if El Niño conditions reduce rainfall across Brazil, India and Thailand.
• Czarnikow has projected a 2.9 MMT global sugar deficit for 2027/28, citing lower cane and beet plantings and potential weather disruption.
• India’s monsoon rainfall remained 15% below normal as of September 15, according to the India Meteorological Department, despite a substantial improvement from earlier in the season.

These factors suggest that the current weakness in sugar prices does not necessarily eliminate the possibility of tighter supply conditions developing further ahead.

Bearish Sentiment

The near-term market continues to face several significant pressures:

• The October London sugar contract received 499,350 tonnes of physical deliveries, 91% above the 260,750 tonnes used to settle the October contract last year.
• The size of the delivery was among the largest recorded for an October contract and is being interpreted as a sign of weak immediate physical demand.
• The US Dollar Index climbed to a one-month high, encouraging liquidation in dollar-denominated sugar futures.
• Commodity funds are carrying a substantial long position. The latest COT report showed funds increased their net NY sugar longs by 28,055 contracts to 160,551, the highest level in almost three years.
• A heavily positioned speculative market can amplify downside pressure if traders begin reducing long exposure.
• The 2025/26 season is still expected to produce a record global sugar crop, with ISO forecasting production of 182 MMT and a 1.1 MMT surplus.
• The USDA expects global 2026/27 ending stocks to rise 2.0% to 44.410 MMT, despite lower production.
• The USDA also expects India’s 2026/27 production to increase 12% to 33.6 MMT, assuming favourable rainfall and increased acreage.

The combination of heavy speculative positioning and large physical deliveries therefore creates a potentially difficult short-term environment even while longer-term supply forecasts are becoming tighter.

Large London Sugar Deliveries Raise Demand Questions

One of the most important developments this week has been the scale of physical deliveries against the October London white sugar contract.

A total of 499,350 tonnes was delivered when the contract expired on Tuesday.

That compares with 260,750 tonnes used to settle the October contract last year, representing an increase of approximately 91%.

The size of the delivery is significant because it suggests that a substantial quantity of physical sugar was available for delivery into the exchange mechanism.

For traders, the immediate question is whether this represents temporary positioning around contract expiry or a broader indication that physical demand remains weaker than expected.

If demand remains subdued, the large delivery could continue to weigh on London prices. Conversely, if buyers absorb the available supply, the market could eventually shift its attention back toward tightening production forecasts.

Commodity Funds Hold a Large Long Position

Speculative positioning has become another important factor.

The latest Commitment of Traders data showed commodity funds increasing their net NY sugar long position by 28,055 contracts during the week ending September 8, taking total net longs to 160,551 contracts.

That was the largest net-long position in almost three years.

Large long positioning can provide underlying support while prices are rising because it reflects substantial speculative demand. However, it also creates a potential source of selling pressure if market sentiment changes.

The recent retreat from the highs therefore creates an important technical and positioning question: whether funds continue holding their positions or begin reducing exposure.

If liquidation accelerates, sugar could experience additional short-term volatility even without a major deterioration in underlying crop fundamentals.

Global Supply Forecasts Are Becoming More Supportive

The longer-term fundamental picture is increasingly focused on the possibility of a global deficit.

The ISO expects the 2025/26 season to produce a 1.1 MMT surplus, with global production reaching a record 182 MMT.

For 2026/27, however, the organisation expects production to fall approximately 1% to 180.1 MMT, producing a projected 200,000-tonne deficit.

Other analysts are forecasting considerably larger deficits.

StoneX has projected a 1.7 MMT deficit, while Covrig Analytics expects a deficit of approximately 300,000 tonnes.

Czarnikow has also warned of a potentially larger structural deficit in 2027/28, forecasting a 2.9 MMT shortfall as lower cane and beet plantings combine with weather-related production risks.

The wide variation between forecasts highlights the uncertainty surrounding the next production cycle.

India Becomes a Key Supply Indicator

India remains one of the most important markets to watch.

India’s Meteorological Department reported that cumulative monsoon rainfall was 15% below normal as of September 15.

Although this represents a major improvement from the 42% deficit recorded on June 30, the rainfall deficit remains relevant because the monsoon is critical to sugar-cane development.

India is the world’s second-largest sugar producer, meaning changes in production can have a substantial effect on global availability.

The decision to permit up to 1 MMT of raw sugar imports without taxes through October 31 is also notable.

India has historically been a major exporter, and substantial imports are unusual. The policy therefore provides another indication that domestic supply conditions are being monitored closely.

Brazil Production Adds to Supply Risk

Brazil remains the world’s largest sugar producer and exporter, making production developments there particularly important.

Unica reported that Center-South June sugar production fell 26.3% year on year to 3.903 MMT.

The Brazilian industry is also facing a changing balance between sugar and ethanol production.

Higher crude oil prices can improve the economics of ethanol production, potentially encouraging mills to allocate more cane toward ethanol rather than sugar.

That can reduce the amount of sugar entering the global market and provide additional support to prices if sustained.

The Brazilian crop will therefore remain one of the most important supply-side indicators for the global sugar market.

El Niño Creates Additional Weather Risk

Weather remains another major variable.

An El Niño pattern has developed across the equatorial Pacific, with the US Climate Prediction Center warning that the event could become one of the strongest in more than 75 years.

For sugar, the potential consequences are significant because Brazil, India and Thailand account for a substantial proportion of global production and exports.

Reduced rainfall or adverse weather during critical growing and harvesting periods could lower yields and tighten global availability.

However, the eventual effect will depend on the strength, duration and regional distribution of the weather pattern.

This means El Niño represents a potential bullish risk rather than a guaranteed production decline.

USDA Forecasts Provide a More Mixed Picture

The USDA’s 2026/27 projections present a somewhat different balance.

The agency expects global sugar production to fall 6.5% year on year to 184.854 MMT, compared with 186.056 MMT in 2025/26.

At the same time, global human consumption is forecast to increase 0.4% to a record 179.991 MMT.

The USDA nevertheless expects global ending stocks to increase by 2.0% to 44.410 MMT.

Regional production forecasts are also mixed:

• Brazil: 42.5 MMT, down 3.0% year on year.
• India: 33.6 MMT, up 12%.
• Thailand: 9.5 MMT, down 15.6%.

The differing forecasts demonstrate why sugar traders need to monitor both production and inventories rather than relying solely on headline deficit estimates.

What Traders Are Watching Next

The next phase of the sugar market is likely to revolve around several competing forces:

1. Physical demand — whether the unusually large London delivery signals persistent weakness.
2. Commodity-fund positioning — whether the substantial NY sugar long position is maintained or liquidated.
3. Brazilian production — particularly Center-South output and the sugar-versus-ethanol allocation.
4. Indian monsoon conditions — and their implications for the 2026/27 crop.
5. Thailand production — given the country’s importance as the world’s second-largest sugar exporter.
6. Global deficit forecasts — particularly the wide differences between ISO, StoneX, Covrig and other estimates.
7. El Niño developments — and whether weather disruption begins affecting production expectations.
8. US dollar direction — given the impact of currency movements on dollar-denominated commodity prices.
9. Global inventories — particularly whether projected increases in ending stocks materialise.

A stabilisation in physical demand combined with deteriorating production expectations could shift attention back toward the global deficit narrative.

Conversely, continued weak demand, heavy speculative positioning and a stronger dollar could keep sugar prices under pressure in the near term.

Currency Hedger View

For sugar producers, refiners, merchants and international buyers, currency movements can have a significant effect on the effective cost of transactions.

Sugar is predominantly priced in US dollars, meaning changes in the dollar can influence purchasing costs for buyers whose operating currencies are different.

The recent rise in the US Dollar Index to a one-month high has therefore added another layer of pressure to the sugar market.

Companies with significant future USD-denominated sugar purchases or sales may need to consider currency exposure alongside the underlying commodity price, particularly while global supply expectations remain volatile.

Currency Hedger provides specialist foreign-exchange and currency-risk analysis for businesses managing international payments and currency exposure.

Market analysis contributed by Currency Hedger, an Octalas Group division specialising in foreign exchange, currency risk and hedging.

Today Markets View

Sugar is currently being pulled in two directions.

The near-term picture is under pressure from weak physical demand, an unusually large London delivery, a stronger US dollar and substantial speculative long positioning.

At the same time, the medium- to longer-term supply outlook is becoming more constructive, with the ISO projecting a 2026/27 deficit and several private analysts forecasting substantially larger shortfalls.

The market therefore needs to distinguish between current physical availability and potential future tightening.

“Sugar is facing a clear divergence between near-term physical-market pressure and increasingly supportive longer-term supply forecasts. The key issue for traders is whether current demand weakness and speculative liquidation can outweigh the emerging production risks in the next crop cycle.”

— Louis Roche, Analyst, Today Markets

Bottom Line

Sugar futures remain caught between short-term bearish pressure and increasingly significant longer-term supply risks.

The massive October London delivery, stronger US dollar and large commodity-fund long position create potential for additional volatility and liquidation pressure.

However, declining production expectations in Thailand and Brazil, India’s unusual decision to permit raw sugar imports, below-normal monsoon rainfall and the potential impact of El Niño provide important bullish considerations.

The key signals to watch are physical demand, fund positioning, Brazilian and Thai production, Indian weather conditions, global deficit forecasts and the US dollar.

Analysis by Louis Roche, Analyst, Today Markets

Market analysis contributed by Currency Hedger, an Octalas Group division specialising in foreign exchange, currency risk and hedging.

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