Sugar prices rose on Tuesday, with NY world sugar #11 and London ICE white sugar #5 both closing higher. The rally was sparked by a +1% increase in crude oil prices, leading to short covering in sugar futures. Stronger crude prices could prompt mills to divert more cane crushing to ethanol production, reducing sugar supplies.

Sugar prices initially fell on Tuesday, with NY sugar hitting a 4.25-year low and London sugar reaching a 4-year low. Declines over the past six months have been driven by a global sugar surplus. StoneX projected a surplus of +2.8 MMT for the upcoming 2025/26 season, a significant shift from a deficit in the previous season.

Brazil’s higher sugar output is impacting prices negatively, with a +18% y/y increase reported in August. India may divert 4 MMT of sugar to ethanol production, potentially leading to increased exports. The International Sugar Organization forecasts a global sugar deficit for the sixth consecutive year, with production and consumption expected to rise.

Expectations of abundant sugar supplies are pressuring prices, with projections of a 7.5 MMT surplus for the upcoming season. India’s potential for higher sugar exports due to favorable weather conditions adds to the bearish outlook. Forecasts indicate increased sugar production in India and Thailand, further weighing on prices.

Read more at Yahoo Finance: Strength in Crude Oil Sparks Short Covering in Sugar