Agency Raises Global Sugar Deficit Forecast, Brazil Center-South Output Estimate Cut to 38.6 Million Tons

en.Wedoany.com Reported - This week (August 10-14), international sugar futures traded in a high-level range: The October contract closed Monday at 16.45 cents/lb (up 5.65% from last Friday), Tuesday at 16.73 cents/lb, with the March contract at 17.71 cents/lb, a spread of nearly 1 cent; Wednesday it touched 17.11 cents/lb intraday before falling 1.85% to 16.42 cents/lb; Thursday it closed at 16.60 cents/lb, up 1.09%. London white sugar hit a 15-month high, supported by EU and UK production estimates falling to 14.98 million tons (an 11-year low).

Several agencies have raised their global sugar deficit estimates: Consulting firm Green Pool increased its 2026/27 deficit from 1.76 million tons to 3.3 million tons, while another firm raised its estimate from 550,000 tons to 1.7 million tons. On Friday, consulting firm Czarnikow projected a 2026/27 deficit of 900,000 tons (production of 178.3 million tons, consumption of 179.2 million tons) and a 2027/28 deficit of 2.9 million tons, due to reduced supply from India, the EU, and Thailand. Global daily consumption is approximately 500,000 tons, and a deficit of 2-3 million tons provides price support, though the scale is relatively limited.

Czarnikow cut its Brazil Center-South production estimate from 39.5 million tons to 38.6 million tons, as heavy rainfall in June and July reduced sugarcane sugar content, while also lowering crushing volumes and the sugar production mix. Positive revisions for China (+300,000 tons), Pakistan (+400,000 tons), Indonesia and the United States (+200,000 tons each) partially offset the decline, while Russia was revised down by 200,000 tons. Data from the Brazilian Sugarcane Industry Association (UNICA) shows that June sugar production in Brazil Center-South fell 26.3% year-on-year to 3.903 million tons, with some sugarcane diverted to ethanol due to attractive oil prices.

India's monsoon rainfall is 12% below average, and the government is studying restrictions on using sugarcane for ethanol production in the November crushing season. Approximately 3 million tons of sugar this season (10% of production) have been diverted to biofuels, with corn and rice as alternative feedstocks; a decision may be made before the end of September. If implemented, India's sugar supply would increase, becoming a major hedge against the current deficit narrative.

The Brazilian government issued Decree No. 13.092, providing 270 million reais in subsidies (12 reais per ton of sugarcane) to independent growers in the Northeast affected by U.S. tariffs and climate events.

On the macro front, Brent crude rose to $89/barrel midweek, fell to $88.35/barrel on Thursday amid reports of a U.S.-Iran deal, and recovered to $88.40/barrel on Friday following renewed statements about strait closures. The dollar traded at 5.2220 reais. Technical analyst Marcelo Moreira placed resistance levels for the October contract at 16.64, 17.11, 17.34, 17.77, and 18.18 cents/lb, with support at 16.33, 16.22, 15.49, 15.00, and 14.89 cents/lb. Non-index funds hold a net long position of 25,000 contracts for the first time since December 2024 (Tuesday positioning). Derivative positions such as knock-in, knock-out, and accumulator options may amplify adjustment volatility.

Sugar prices in reais are higher than 12 months ago, and with the dollar above 5.2220 reais, hedgers tend to lock in prices in batches. Brazil's upcoming presidential election may increase exchange rate volatility, and if the dollar falls below 5.2500 reais, the market could face greater uncertainty.