ICE raw sugar edged higher Friday. October No.11 settled at 14.77/lb, up 0.08 cents. London white sugar for October delivery added $1.00 to settle at $444.50 per metric ton. The market is stuck in a narrow range near ethanol parity, transitioning from the current surplus into what looks like a tighter 2026/27 balance.
The number that matters most in sugar is the ethanol parity calculation in Brazil., the world's largest sugar producer and exporter. At current ICE No.11 prices around 14.5-15.3/lb, sugar is trading below ethanol parity, meaning Brazilian mills earn more by directing sugarcane to ethanol production than to sugar. This creates a powerful structural force that is expected to reduce Brazil's sugar output in the 2026/27 season.
Data from early in Brazil's 2026/27 harvest confirms this trend. Czarnikow reports that in the first months of the new crop, only 33% of crushed cane in Center-South Brazil was directed to sugar production, with the remainder going to ethanol. This compares to roughly 49% in the prior season. The USDA now forecasts Brazil's 2026/27 sugar production at 42.5 million metric tons, down approximately 3% from the previous year, explicitly citing the ethanol diversion dynamic.
This shift matters for the global balance. The market has spent most of 2025 and early 2026 absorbing a large global surplus, estimated at 5-7 million metric tons for the 2025/26 season. StoneX data shows that the 2025/26 surplus has been fully priced into the current market structure. The forward curve for No.11 futures is in a slight contango, reflecting the transition from surplus to a more balanced or potentially deficit market in 2026/27.
UNICA, the Brazilian sugarcane industry association, is expected to release its biweekly Center-South crushing report in the coming days. This report will be the first major data point for the 2026/27 harvest and will provide concrete evidence of the sugar/ethanol mix. Everyone will be watching the percentage of cane going to sugar versus ethanol., as well as the total crushing volume and sugar output. A mix below 48% sugar would confirm the ethanol diversion thesis and likely trigger a rally.
Demand-side factors provide modest support. Global sugar consumption continues to grow at approximately 1.5% annually, driven by population growth in Asia and Africa. India's sugar consumption, the largest in the world, continues to expand. However, the Indian government's sugar export policy remains a wild card. India has maintained tight controls on sugar exports since 2023 to keep domestic prices in check, and any policy shift that allows significant Indian exports would be bearish for global prices.
Analysts are split on 2026/27. Some see a small 2-3 MMT deficit. Others see a small surplus. ING Think argues that prices need to remain below ethanol parity to ensure sufficient ethanol diversion, effectively capping the upside. Rabobank projects a broadly balanced market, with the key variable being the Brazil mix. The bull case rests entirely on Brazil ethanol diversion exceeding expectations, potentially pushing the market into a deficit of 5+ million metric tons.
Sugar buyers should view the current 14-15/lb range as potentially the low end of the pricing cycle for the next 12 months. The Brazil ethanol diversion dynamic is structural, not cyclical, and will progressively tighten sugar availability. Buyers with coverage needs for Q2-Q3 2027 should consider layering in coverage at current levels. The key data point to watch is UNICA's first biweekly crushing report for the 2026/27 season, expected within days. A sugar mix below 48% would confirm the ethanol shift and could push No.11 prices toward 16-17/lb. A mix above 50% would delay the tightening narrative and potentially push prices to test 13/lb support. The Indian export policy is the wild card: any easing could add 3-4 million tons to global trade flows and cap the upside regardless of Brazil's mix. Buyers should structure contracts with flexible volume provisions to adjust coverage based on UNICA data flow.