Sugar prices surge on El Niño supply risks

Sugar prices advanced sharply in international and domestic markets during August. In its latest monthly report on international food prices, the Food and Agriculture Organization of the United Nations (FAO) reported that consumers paid 12% more for sugar in August compared to July. In Brazil, the world's largest producer, mill prices for crystal sugar climbed 20% in the period, according to analyst Maurício Muruci of consultancy Safras & Mercado.

On the New York exchange, sugar prices surged 30% from the beginning to the end of August, reaching $0.18 per pound. Safras & Mercado projects that prices could reach $0.22 or $0.23 per pound by February next year. In addition to weather concerns, oil prices returning above $100 per barrel have spurred commodity investment and increased demand for ethanol, which competes with sugar for sugarcane usage.

The price rally follows supply disruptions linked to El Niño. The United States National Oceanic and Atmospheric Administration (NOAA) indicated that the phenomenon, which began in May this year, will last until May next year, with peak ocean temperature anomalies potentially exceeding 3.5°C above the 50-year historical average in October. Global sugar production for the 2026/27 season is projected at 175 million metric tons, down from 189 million currently and below international demand of 183 million metric tons.

Crop reductions are projected across major producing regions. Brazil and the European Union are each forecast to produce 3 million metric tons less than expected. India faces a 3.8 million ton shortfall, Thailand is expected to produce 2 million tons less, and China 1.5 million tons less. In Brazil, rainfall patterns are expected to end the current harvest two months early and delay the start of the next season by two months.