May NY world sugar #11 (SBK26) on Wednesday closed up +0.57 (+4.04%), and Aug London ICE white sugar #5 (SWQ26) closed up +11.90 (+2.75%).
Sugar prices rallied sharply on Wednesday, with NY sugar posting a 3-week high and London sugar posting a 4-week high. Strength in gasoline prices is supportive for sugar, as gasoline (RBM26) surged to a 3.75-year high on Wednesday, boosting ethanol prices and potentially persuading the world’s sugar mills to divert more cane crushing toward ethanol production rather than sugar, thus curbing sugar supplies.
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The action by Brazil’s sugar mills to boost ethanol production at the expense of sugar is supportive for sugar prices. On Tuesday, Conab in its initial report for the new sugar season reported that 2026/27 Brazil sugar output is down -0.5% to 43,952 MT, while ethanol output is up +7.2% y/y to 29,259 million liters.
Sugar prices have been under pressure for the past four weeks, with NY sugar falling to a 5.5-year low in the nearest futures contract on April 17 amid expectations of abundant global supplies and tepid demand. The April 15 expiration of the May London sugar contract saw 472,650 MT of deliveries to settle the contract, the most for a May contract in 14 years, a sign of tepid sugar demand.
On April 17, Conab, Brazil’s government forecasting agency, said that it expects 2025/26 Brazil sugar production of 44.196 MMT, up +0.1% y/y. On March 27, Unica reported that cumulative 2025-26 Center-South sugar output (October through mid-March) rose +0.7% y/y to 40.25 MMT, with sugar mills boosting the amount of cane crushed for sugar to 50.61% from 48.08% last year.
Sugar prices also took a hit earlier this month when India’s Food Secretary said the government has no plans to ban sugar exports this year, easing concerns that it could divert more sugar to make ethanol following the Iran war disruption to crude oil supplies. On February 13, India’s government approved an additional 500,000 MT of sugar for export for the 2025/26 season, on top of the 1.5 MMT approved in November. India introduced a quota system for sugar exports in 2022/23 after late rain reduced production and limited domestic supplies.
The outlook for smaller Brazilian sugar output is supportive of prices. Last Tuesday, the USDA forecast Brazil’s 2026/27 sugar production at 42.5 MMT, down -3% y/y, citing millers crushing more cane for ethanol than for sugar.
Signs of a smaller global sugar surplus are also supportive for prices. Last Tuesday, Covrig Analytics cut its 2026/27 global sugar surplus estimate to 800,000 MT from 1.4 MMT previously. Last Monday, sugar trader Czarnikow cut its 2026/27 global sugar surplus estimate to 1.1 MMT from 3.4 MMT in February, and cut its 2025/26 surplus estimate to 5.8 MT from 8.3 MMT.
Sugar prices also have some support amid concerns over supply disruptions from the ongoing closure of the Strait of Hormuz.