Surge in Crude Prices Sparks Short Covering in Sugar

Group 1: Sugar Price Movements - Sugar prices are experiencing an upward trend, with March NY world sugar 11 increasing by +1.72% and December London ICE white sugar 5 rising by +1.17% due to a rally in crude oil prices [1] - The surge in crude oil prices, which rose more than +5% to a two-week high, is expected to lead sugar mills to shift more cane crushing towards ethanol production, potentially reducing sugar supplies [1] Group 2: Sugar Production and Supply Outlook - Sugar prices have been under pressure for the past seven months, with NY sugar reaching a 4.5-year low and London sugar hitting a 4.25-year low due to increased sugar output in Brazil, which rose by +10.8% year-on-year to 3.137 million tons in the second half of September [2] - Brazil's sugar mills increased the percentage of sugarcane crushed for sugar from 47.73% to 51.17% year-on-year in the same period, contributing to a cumulative sugar output of 33.524 million tons for 2025-26, up +0.8% year-on-year [2] - Datagro projects Brazil's Center-South sugar production for 2026/27 to rise by +3.9% year-on-year to a record 44 million tons, while BMI Group forecasts a global sugar surplus of 10.5 million tons for 2025/26 [3] Group 3: India’s Sugar Production and Export Potential - India's sugar production is expected to increase by +19% year-on-year to 34.9 million tons for 2025/26, following a significant decline of -17.5% year-on-year to 26.2 million tons in 2024/25 [4] - The Indian Meteorological Department reported that cumulative monsoon rainfall was 937.2 mm, 8% above normal, indicating a strong monsoon that could lead to a bumper sugar crop [4] - India may divert 4 million tons of sugar for ethanol production in 2025/26, which may not sufficiently alleviate the sugar surplus and could lead to increased exports of up to 4 million tons, exceeding earlier expectations of 2 million tons [5]