Strength in Crude Oil Sparks Short Covering in Sugar

Core Insights - Sugar prices have shown a recovery after early losses, influenced by a rise in crude oil prices, which may lead to reduced sugar supplies as mills shift towards ethanol production [1] - A significant global sugar surplus is projected for the 2025/26 season, contrasting with a previous deficit, indicating a bearish outlook for sugar prices [2] - Increased sugar output in Brazil and potential sugar diversion to ethanol production in India are contributing to the negative price outlook [3][4] Group 1: Sugar Price Movements - October NY world sugar 11 closed up +2.69%, while December London ICE white sugar 5 closed up +2.62% [1] - Sugar prices initially hit a 4.25-year low in New York and a 4-year low in London, reflecting a declining trend over the past six months due to abundant global supply [2] Group 2: Global Sugar Supply and Demand - StoneX projects a global sugar surplus of +2.8 million metric tons (MMT) for the 2025/26 season, a shift from a deficit of -4.7 MMT in the 2024/25 season [2] - The International Sugar Organization (ISO) forecasts a global sugar deficit of -231,000 metric tons for the 2025/26 season, improving from a -4.88 MMT shortfall in 2024/25 [5] Group 3: Regional Production Insights - Brazil's sugar output in the second half of August increased by +18% year-on-year to 3.872 million tons, with a higher percentage of sugarcane crushed for sugar [3] - India's potential diversion of 4 MMT of sugar to ethanol production may not alleviate its sugar surplus, leading to increased exports [4]