Stocks slow the price despite tightness in sugar

The outlook for the global sugar market has become clearly tighter in recent months. Yet that is not translating directly into much higher prices. Ample inventories and signals of moderate physical demand are keeping the market in check. At the same time, production risks in Europe, Brazil and Asia are increasing. The sugar price clearly shows that tension. Raw sugar in New York reached its highest level in about a year and a half on 10 September, but then gave back part of the gains. On Tuesday 29 September, support returned. Raw sugar rose 2.1% to 17.82 dollar cents per pound. White sugar in London became 1.1% more expensive at $509.50 per tonne. That does not yet mean a new straight line upward. In September, sugar prices were under pressure for some time. According to the European Commission, high Brazilian inventories and related selling interest played a role. Pakistan also allowed more sugar exports. On 22 September, white sugar stood at $508 per tonne and raw sugar at $388 per tonne. From surplus to deficit Beneath the surface, the market balance has changed. For season 2025/26, the International Sugar Organization (ISO) is still assuming a global surplus of 1.1 million tonnes. A year earlier, there was a deficit of 3.46 million tonnes. For 2026/27, ISO again expects a deficit, albeit of only 200,000 tonnes. On a global production of around 180 million tonnes, that is barely more than a rounding difference. More important is therefore the direction in which the forecasts are moving. The comfortable surplus on which earlier forecasts were based has disappeared. As a result, the market has less room to absorb new production setbacks. At the same time, the forecasts differ considerably. StoneX recently reduced its expectation for the global deficit from 1.7 million to 900,000 tonnes. That underlines how close supply and demand are and how quickly the picture can change. European harvest gets hit hard Europe is one of the reasons the balance is becoming tighter. Not only is the beet area smaller, yields are also disappointing. In this week's MARS report, the European research institute JRC lowered the average EU yield to 67.4 tonnes of sugar beet per hectare. That is 11% below the five year average and 17% below last year. France in particular is falling sharply. There, the estimate at 65 tonnes per hectare is 21% below the five year average and even 28% below last year. We also see that picture reflected in the figures from statistical office Agreste of the French Ministry of Agriculture. At 68.2 tonnes per hectare, Agreste is slightly less negative than the MARS report, but that changes little about the outcome. The French statistical office assumes a 6.3% reduction in area and a 24.4% decline in yield. As a result, root production falls by 29.2% compared with last year to 25.4 million tonnes. That means the French are producing 10.4 million tonnes fewer beets than in 2025. European sugar production could therefore fall sharply. The European Commission expects around 13.4 million tonnes for 2026/27, compared with 16.58 million tonnes in the previous season. At the same time, the beet area is shrinking by 8.4% to 1.224 million hectares. The Netherlands is doing relatively well in terms of yield per hectare. JRC expects 82.3 tonnes of beets per hectare, 2% below the five year average. Sugar producer Cosun is aiming for slightly lower yields. Cosun Beet Company expects a quarter less beets than last year on an area 11% smaller. Sugar production per hectare is estimated at 14 tonnes, compared with 15.6 tonnes last year. Inventory dampens price reaction Still, no immediate sugar shortage is emerging in Europe. The sector is entering the new season with a substantial buffer. At the end of July, European stocks stood at about 5.80 million tonnes. That was more than 1 million tonnes above a year earlier. The physical sugar price also still shows little tightness. The average selling price of European producers came to €500 per tonne in August, €36 less than a year earlier. In the major producing countries, including the Netherlands, Belgium, Germany and France, an average of €495 per tonne was paid. In the deficit regions, the price was clearly higher at almost €550. While the London futures price has recovered since spring, physical selling prices in the EU are moving much less. The futures market is therefore anticipating a potentially tighter market that is still only limitedly felt in physical trade. Brazil cannot simply make more sugar Brazil is an important factor for the direction of the world market. Normally, Brazilian mills can respond to a higher sugar price by directing more cane to sugar and less to ethanol. Current weather conditions make that more difficult. Because of the exceptionally wet weather in central southern Brazil, the harvest is proceeding slowly and the sugar cane contains relatively much moisture. That reduces the sugar concentration. According to analysts, the cane is therefore relatively attractive for ethanol production. Even now that sugar is economically more attractive than ethanol, mills are not simply able to raise the sugar mix sharply. That is important. A shift of 1 percentage point in the Brazilian production mix toward sugar is, according to the analysis, equivalent to about 750,000 tonnes of extra sugar. The choice of Brazilian mills can therefore have a greater effect than the entire global deficit that ISO expects for 2026/27. StoneX has already lowered its expectation for sugar production in central southern Brazil. While at the start of the harvest more than 40 million tonnes was still being assumed, production according to the bureau may not exceed 38 million tonnes. More rain could lead to further reductions. Asia offers little certainty For now, Asia also provides little relief. Thailand, one of the world's most important exporters, expects around 10 million tonnes of sugar for 2026/27. That is 17% less than a year earlier. India is an even more striking factor. The country normally sits on the supply side of the world market, but needs imports this year. In August, the Indian government allowed duty free imports of up to 1 million tonnes of raw sugar. At the same time, the monsoon lagged behind: at the end of September, rainfall since June was about 12% below normal. As a result, Europe and India are increasingly competing for sugar on the world market, while less export supply may also come from Thailand.