Brazilian Real Strength Supports Sugar Prices

Core Insights - Sugar prices have shown mixed performance, with NY sugar reaching a 5-week high while London sugar declined slightly, influenced by the strength of the Brazilian real which discourages exports [1][2] Supply and Production - StoneX has revised Brazil's 2026/27 Center-South sugar production estimate down to 41.5 million metric tons (MMT) from 42.1 MMT, indicating potential supply constraints [2] - India's food ministry is considering increasing the price of ethanol for gasoline blending, which may lead to a shift in sugar production towards ethanol, thereby reducing sugar supplies [2] - The International Sugar Organization (ISO) forecasts a sugar surplus of 1.625 million metric tons for 2025-26, driven by increased production in India, Thailand, and Pakistan, contrasting with a previous deficit forecast [4] - Brazil's crop forecasting agency, Conab, has raised its 2025/26 sugar production estimate to 45 MMT, indicating robust output that may pressure prices [6] Market Dynamics - The outlook for global sugar supplies has negatively impacted prices since early October, with significant drops in both London and NY sugar prices due to anticipated surpluses [5] - Czarnikow has increased its global sugar surplus estimate for 2025/26 to 8.7 MMT, reflecting a growing concern over supply outpacing demand [5] - Brazil's Center-South sugar output in the second half of October rose by 16.4% year-on-year, with an increase in the percentage of sugarcane crushed for sugar, further contributing to the bearish outlook [6]