Indian rainfall and crude oil volatility drove short-term price swings, while increasingly bearish production prospects for Brazil and Thailand strengthened the longer-term bullish case.
Sugar prices drifted lower through most of the week as an improving Indian monsoon outlook and a sharp two-day crude oil selloff weighed on both New York and London contracts, before a strong Wednesday crude rally helped stabilise prices into the close. October NY world sugar #11 fell 1.29 percent Monday, 0.21 percent Tuesday, and a further 0.34 percent Wednesday, marking a 1.5-week low, while October London white sugar #5 declined 0.52 percent and 0.46 percent over the first two sessions before reversing to close up 0.35 percent Wednesday. The bearish tone through the bulk of the week stemmed from better-than-feared Indian rainfall and early-week crude weakness discouraging ethanol diversion, while El Niño-driven crop risk, a shrinking Brazilian sugar mix, and successive upward revisions to 2026/27 global deficit forecasts kept a floor under the market.
Improving Indian Monsoon Undercuts the Bullish Narrative
The week's primary bearish driver was a meaningful improvement in Indian rainfall data. India's Meteorological Department reported cumulative monsoon rainfall improving from 42 percent below normal on June 30 to just 16 percent below normal by July 27, and 15 percent below normal by July 29, a rapid closing of the earlier deficit that eases concern over India's cane crop. That improvement lends support to the USDA's April 30 forecast of a 2.5 million tonne Indian sugar surplus for 2026/27, its first surplus in two years, with the agency's Foreign Agricultural Service projecting Indian production will climb 12 percent year on year to 33.6 million tonnes on favourable rains and expanded acreage.
Compounding the pressure, WTI crude oil tumbled more than 7 percent Monday and a further 5 percent Tuesday, undercutting ethanol economics and potentially encouraging Brazilian mills to direct more cane crushing toward sugar rather than ethanol, a dynamic that would add to global supply. This sits against an already ample backdrop, with the International Sugar Organization having forecast a record 2025/26 global sugar crop of 182 million tonnes in May, up 3.5 percent year on year, alongside a raised global surplus estimate of 2.2 million tonnes for that season.
El Niño Risk and a Deepening 2026/27 Deficit Consensus Limit the Downside
The week's most significant development, however, may prove to be the rapid convergence of independent forecasters around a materially tighter 2026/27 global balance. Green Pool Commodity Specialists raised their global deficit estimate to 3.3 million tonnes from a June estimate of 1.76 million tonnes, reported July 29, while StoneX lifted its own forecast to a 1.7 million tonne deficit from a May estimate of just 550,000 tonnes, an update made Tuesday. Czarnikow had already cut its balance estimate in June to a 100,000 tonne deficit from a prior surplus forecast of 1.4 million tonnes, and Covrig Analytics trimmed its surplus forecast to 100,000 tonnes from 380,000 tonnes previously. The ISO's own May outlook calls for global production to fall 1.15 percent year on year to 180 million tonnes and a deficit of 262,000 tonnes, citing El Niño risk to the Indian and Thai harvests specifically.
That risk is far from theoretical. The US Climate Prediction Center said on July 8 that the emerging El Niño pattern will likely be one of the strongest in more than 75 years, threatening rainfall across Brazil, India, and Thailand simultaneously, the world's three largest producing regions. India's own weather office has already lowered its cumulative monsoon forecast to 90 percent of the long-term average, down from 92 percent in April, while the Foreign Agricultural Service projects Thai production will fall 15.6 percent year on year to 9.5 million tonnes. Brazil's cane mix has shifted further toward ethanol as well, with Unica reporting the sugar-allocated share of Center-South cane falling to 41.42 percent from 50.09 percent a year earlier, and Conab and the Foreign Agricultural Service both projecting modest declines in Brazilian sugar output for 2026/27\. Wednesday's sharp crude oil rally, up more than 6 percent, reinforced this dynamic by reviving the incentive for mills to divert cane toward ethanol rather than sugar.
