ICE No.11 raw sugar futures have stabilized in a 14.5-15.3 US cents per pound range in late July, recovering from the multi-year lows below 14.0 ¢/lb seen earlier in 2026. The July contract climbed 2.7% to 14.45 ¢/lb in a short-covering rally, but prices remain historically cheap compared to the 2023 peak above 27 ¢/lb and still reflect the large 2025/26 global surplus that has been the dominant narrative for 18 months.
The International Sugar Organization and private analysts converge around a 2025/26 global surplus of approximately 7 million metric tons, the largest since 2017/18 and a dramatic reversal from the 2-3 MMT deficit of 2024/25. The swing is driven primarily by Brazil's record Center-South (CS) cane crush, India's strong production recovery, and Thailand's rebound from drought.
H2: Brazil: the pivot point between surplus and deficit
Brazil's Center-South region is the fulcrum of the global sugar market, accounting for roughly 70% of world raw sugar trade. The CS 2025/26 season produced an estimated 44-45 MMT of sugar with exports of approximately 36 MMT - both record levels. The sugar mix (the percentage of cane directed to sugar rather than ethanol) reached 50.7-51.1%, the highest in several years and a primary driver of the global surplus.
That mix is now shifting decisively. With WTI crude at $62-66/bbl, ethanol production is more profitable than sugar at current sugar prices. The ethanol parity threshold - the sugar price at which mills are indifferent between producing sugar and ethanol - is estimated at 14.5-15.0 ¢/lb. At current sugar prices near 15 ¢/lb, the market is right at this inflection point.
Data from the Brazilian Sugarcane Industry Association (UNICA) confirms the shift is already underway. In early April 2026, only 32.9% of CS cane went to sugar production, down sharply from 44.7% in the same period a year earlier. Mills have structurally responded to the energy market signal: ethanol pays better than sugar at current ICE No.11 levels. Citigroup forecasts Brazil's 2026/27 sugar production will drop to 39.50 MMT, well below the 43.95 MMT estimated by government agency Conab, driven entirely by ethanol diversion.
Heavy rainfall in July 2026 has added a logistical dimension to the Brazilian supply picture. Persistent rain in Sao Paulo and other CS states has delayed harvesting and crushing operations. While the moisture improves soil conditions for the next season, it disrupts near-term sugar availability and supports prices. A stronger Brazilian Real (BRL) in July is further discouraging export sales, as producer returns in local currency terms are compressed.
H2: India: production recovered, exports remain constrained
India's sugar output recovered strongly to approximately 35 MMT in 2025/26, up 9% year-on-year, adding weight to the global surplus. But the government has maintained a tight export stance: a de facto export ban for the 2024/25 season has been extended, with mid-2026 commentary still framing exports as 'restricted.' Policy uncertainty persists regarding whether limited exports (up to 2 MMT) might be permitted if monsoon rains and domestic stocks are comfortable.
The Indian government is simultaneously promoting ethanol blending and raising the Fair and Remunerative Price (FRP) for cane. The FRP hike for the 2026/27 season increases production cost floors and supports global price floors, because Indian internal prices effectively set a minimum price for sugar that can be exported. Higher Indian costs mean that any exports from India will not be cheap - limiting the downside for global prices.
H2: Forward outlook: the surplus that wants to become a deficit
The global sugar market is at a structural inflection point. The 2025/26 surplus is large and fully priced. The critical question is whether 2026/27 will deliver a deficit. The answer depends on three variables: Brazilian ethanol diversion (already accelerating), Indian export policy (likely restrictive), and global energy prices (which determine ethanol's competitiveness).
ING forecasts that raw sugar No.11 will average 15.40 ¢/lb in 2026, with Q3 (the peak of the CS Brazil harvest) as the weakest quarter. For 2027, the outlook is more constructive: if Brazil's sugar output falls to 39-41 MMT as the ethanol mix shifts, the global balance could move into a deficit of 2-4 MMT, supporting prices above 17 ¢/lb.
Bull case: Aggressive ethanol diversion + Indian export ban + energy price rally push sugar above 18 ¢/lb by Q1 2027. Probability: 25%. Bear case: Brazil rains pass without disruption, ethanol parity holds, and Indian exports resume at volume, keeping sugar at 13-14 ¢/lb. Probability: 30%. Base case: Range-bound between 14-16 ¢/lb, with the market grinding higher toward 2027 as the surplus narrative gradually inverts. Probability: 45%.
Raw sugar buyers face an attractive but nuanced procurement environment. The current 14.5-15.3 ¢/lb range represents the most competitive pricing window in five years on an absolute basis. However, the market is at a structural pivot point where the surplus narrative is peaking and the deficit narrative is gaining credibility. The optimal strategy is to layer in coverage: secure 60-70% of 2026 requirements at current levels, particularly for H2 2026 deliveries, given that Q3 (the CS Brazil harvest peak) is likely the weakest quarter. For 2027 coverage, the risk-reward is more balanced and favors using call options rather than outright futures to participate in the expected tightening, as the surplus-to-deficit transition is a low-probability-but-high-impact event. Monitor the Brazilian ethanol parity level at 14.5-15.0 ¢/lb: sustained trading below this level will trigger structural supply reallocation toward ethanol and is a buy signal for physical sugar. The BRL exchange rate is the tactical variable: any real depreciation toward 5.50/USD should be used to accelerate physical coverage.