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sugar Things are becoming less lenient for buyers.
Sugar prices rose 21.5% in August, the biggest monthly increase since October 2010, when they rose 24%. The United Nations Food and Agriculture Organization’s food price index also rose in August, following broad-based gains led by sugar.
“The surge reflects expected lower sugar beet yields in the European Union due to adverse weather conditions, concerns about the impact of El Niño on production prospects in major Asian producers, lower sugar production in Brazil, and India’s announcement of duty-free imports of raw sugar,” the group said in a recent report.
Sugar futures rose ahead of the rise in August. S&P500 On a year-to-date basis. Sweeteners are currently up about 20% in 2026, while the overall market index is up nearly 13%.
The Food and Agriculture Organization of the United Nations points out that several factors are involved in the soaring price of sugar, which collectively push up market prices.
William Osnato, Barchart’s director of commodity data research and analysis, said the rise in sugar prices reflects changing expectations for global supplies. Osnato told CNBC that summer heat waves that damaged Europe’s sugar beet crops were one of the biggest immediate contributors.
Because sugar beets are grown in the same places and at the same time as corn and wheat, heatwaves can have a big impact on sugar production.
“That’s been priced in since last month. That’s why many organizations have lowered their production forecasts,” Osnato said.
Various organizations have lowered their production forecasts or increased their deficit forecasts in recent reports. The European Commission’s latest sugar balance sheet forecasts EU production in the 2026/27 market year to fall by 19% to 13.4 million tonnes from 16.6 million tonnes in 2025/26. In a note on Tuesday, Citi estimated the global shortage at 1.3 million tonnes, while Green Pool Commodity Specialists put it at 3.2 million tonnes.
“What’s usually consistent is that they’re all pointing in the same direction,” Osnato said. “They’re all increasing their deficits.”
Citi analysts said in a note that sugar has the “highest bullish confidence” market among agricultural products traded on the Intercontinental Exchange. The bank raised its three-month price target to 19 cents a pound, citing tight inventories, unexpected import plans in India and worsening weather in India, Thailand and the EU.
El Niño threatens future harvests
Osnato said El Niño, a global climate pattern that can lead to warmer ocean temperatures and more severe weather, is probably the “biggest future concern.”
An extreme El Niño event is possible, increasing pressure on sugar prices.
Brazil, India and Thailand together account for about 70% of global sugar exports. Goldman Sachs said in a note that drought during the growing season can reduce sugarcane yields, and excessive rain during the harvest season can disrupt field operations and lower cane sugar levels. Climate Brink’s median multi-model forecast indicates that temperature anomalies in the Pacific Niño 3.4 region will reach around 3.9 degrees Celsius (about 39 degrees Fahrenheit) in November. This is far above the 2 degrees Celsius, or 35.6 degrees Fahrenheit threshold for a very strong El Niño.
India’s major sugar-producing regions are experiencing below-normal rainfall. A weak monsoon could deplete reservoirs and deter many farmers from planting water-intensive sugarcane the following season. In addition, unusually warm Pacific temperatures are expected to cause unusual rainfall and water shortages across Thailand.
Brazil’s ethanol focus and India’s sugar imports
Rising energy prices have made ethanol more attractive than sugar in Brazil, allowing factories to convert sugarcane into the two products.
“When oil prices rise, countries that produce ethanol from sugar have more incentive to produce more ethanol and export less sugar to global markets,” Rob Johansson, director of economic and policy analysis at the American Sugar Alliance, told CNBC in an email. “With oil prices above $90 per barrel, countries like Brazil, which heavily subsidizes the ethanol industry, are ramping up biofuel production, reducing the amount of sugar available on the market and putting upward pressure on prices,” Johansson said.
Brazil alone accounts for about half of the world’s sugar exports. Brazilian factories can typically switch their production mix between sugar and ethanol, depending on which is more profitable.
According to Goldman Sachs analysis, corn is a key feedstock for ethanol production, along with sugarcane, so a poor corn crop due to El Niño-related drought could divert more sugarcane to ethanol production, leaving less sugar available for export.
Harvest has also been delayed in Brazil because of the rain, Osnato said. Some production could recover once fields dry out, and a rebound in sugar levels and an earlier harvest in Brazil could be among the most obvious downside risks to prices.
India, the world’s second largest sugar producer after Brazil, recently approved duty-free imports of 1 million tonnes of raw sugar. The Indian government said the decision was aimed at strengthening domestic supply amid declining production, seasonal demand and rising prices. India’s entry into the market as a buyer while restricting exports could reduce the amount of sugar available to other importing countries.
Osnath said the decision was important as it followed two disappointing crops and was India’s first import permit since the 2017-2018 season. He said the move supports the view that supplies are tighter than previously estimated, even though India is importing only about half of its authorized amount.
“Brazil remains the market’s leading balancing supplier, but weather-related execution risks during the remainder of the harvest period leave little room for error,” Citi analyst Arkady Gevorkyan said in a note.
—CNBC’s Nick Wells contributed reporting.
