Sugar price surges on production worries

The mood in the international sugar market has clearly shifted in a short time. While ample supplies and modest physical demand were still limiting price gains last week, traders are now mainly looking ahead. Concerns about production in Brazil, India, Thailand and Europe have pushed the sugar price to its highest level in more than a year and a half.Raw sugar in New York made another big jump on Monday. The March contract rose 4% to 20.73 US cents per pound and touched 20.81 US cents during the trading day. That is the highest level for the front-month contract in nineteen months. In the previous week, raw sugar had already gained 7.7%. White sugar in London rose 3% on Monday to $547.60 per tonne and reached $552.50 intraday.As a result, the price increase that cautiously began in the summer has moved into a higher gear. The FAO figures also show that shift. The FAO Sugar Price Index rose for the third month in a row in September and came in 6.1% higher than in August. The index is now 14.7% above the level of a year ago and at its highest point since April 2025.Brazil puts market on edgeThe immediate reason for the latest price increase comes mainly from Brazil. In Brazil's main sugar-producing region (Centro-Sul), heavy rainfall has delayed the sugar cane harvest and processing. In the first half of September, sugar production was therefore 41.6% lower. The handling of sugar in Brazilian ports is also being hindered by the weather.Analysts at Green Pool point out that after the record rainfall in September, a lot of precipitation is also expected in October. As a result, fears are growing that Brazilian production will ultimately come in clearly below earlier estimates.That ties in with the signals from last week. StoneX has already lowered its sugar production forecast for Centro-Sul. At the start of the harvest, production of more than 40 million tonnes was still expected, but meanwhile there is a chance that production will not exceed 38 million tonnes.In addition, the Brazilian real strengthened sharply against the dollar on Monday. A stronger real makes it less attractive for Brazilian producers to sell sugar on the world market. That gave the futures market an extra push upward.Market looks beyond current surplusWhat stands out most is that the market is attaching less and less weight to the relatively ample current availability. For the 2025/26 season, the International Sugar Organization still expects a global surplus of 1.1 million tonnes. Production is estimated at 182 million tonnes. For 2026/27, however, the picture changes. ISO expects production to fall by about 1% to 180.1 million tonnes and forecasts a deficit of around 200,000 tonnes.That deficit is not large in itself. The problem is that the buffer to absorb further setbacks has virtually disappeared. That appears to be what the futures market is now reacting to. Rain in Brazil, drought in India or another setback in Thailand could quickly push an almost balanced world market further out of balance.The position of speculators reinforces that movement. In the week to 29 September, speculators increased their net long position in raw sugar by 3,762 contracts to 96,377 contracts. The recent weather problems give those traders little reason to take profits.