Will ethanol be the savior for the sugar market?

Slowly, sugar is climbing back up in the futures markets. However, the sentiment among market players is not yet positive. This is mainly due to a surplus on the global sugar market projected by the ISO. Some more bullish news can be reported from India. That country has less sugar to export than analysts had previously anticipated. After the dip at the beginning of November when sugar prices in the futures markets of New York and London fell significantly, we are now seeing a moderate recovery. Sugar climbed to its highest level in over a month. The rise in the futures markets is not yet convincing according to analysts. The sugar production for the upcoming season is estimated to be larger than consumption. The International Sugar Organization (ISO) calculates a surplus in the sugar balance of 1.6 million tons for the 2025/26 season. For the 2024/25 season, there was still a deficit of 2.9 million tons in the balance. Global sugar production is growing by 3.2% to 181.8 million tons according to the organization. Sugar consumption is growing less rapidly, namely by 0.6% to 180.2 million tons. The larger harvest is mainly due to better harvests in India, Pakistan, and Thailand. In the previous forecast from August, the ISO still anticipated a deficit in the balance for the 2025/26 season of 231,000 tons. The forecast has therefore been significantly revised. The export of sugar from India is somewhat of a separate story. There were expectations from traders that India would set an export quota of 2 million tons. That quota turned out to be slightly lower. A total of 1.5 million tons of sugar may be exported from India, as announced by the government earlier this month. The export quotas were set a few years ago because India faced a tight supply of sugar in the domestic market. Although sugar can now officially be exported, there is still little interest among Indian producers to actually ship sugar abroad. The problem is the low sugar price on the world market. On the Indian market, the sugar price is somewhat higher. News agency Reuters reports based on various traders that Indian sugar is $450 per ton FOB (free on board). Thus, Indian sugar is about $25 per ton more expensive than the benchmark, the futures market contract on the Liffe in London. Another factor affecting the Indian sugar industry is ethanol production. The Indian Ministry of Food is reportedly considering raising the prices for ethanol. For sugarcane processors, it then becomes interesting to produce more ethanol instead of sugar. This has direct consequences for the availability of sugar for export and thus also on the global sugar balance. Weak real favorable for Brazilian export Another major exporter of sugar on the global market, Brazil, has the wind at its back. The value of the Brazilian real is under pressure, which is favorable for Brazilian exports. They have sufficient sugar available, as evidenced by the harvest forecasts. Conab raised its production forecast for 2025/26 to 45 million tons on November 4. Unica reported that sugarcane production in Central-South Brazil was 16.4% higher in the second half of October compared to last year. Over the entire season up to and including October, we are talking about a 1.6% larger production of 38 million tons.