World market developments: Indian production estimates lowered
New York sugar prices moved lower in February, dipping below 14 cents/lb. Speculators continued to sell sugar futures and extend their already-large net short position. This pushed the index-linked beet price below £21/tonne for a short period.
However, prices staged a partial recovery in the last week of the month, bringing October 2026 futures back above 14 cents/lb and the index-linked beet price back towards £23/tonne.
One source of support for prices was the news from India that this year’s crop will be smaller than expected. The Indian Sugar Millers Association downgraded its estimate of the 2025/26 crop by around two million tonnes, effectively meaning that India will not have much sugar to export in the coming months. On top of this, a large refinery on the west coast of India has announced it will close. Both these factors together will help to reduce global white sugar supply.
However, with the start of Brazil’s 2026 harvest fast approaching, this news is not enough to alter the prospect of a sugar surplus in 2026. Low sugar prices relative to ethanol mean that mills are expected to focus on ethanol at the start of the campaign. This will help to ‘lose’ some potential sugar production during this period. However, as ethanol supply builds, prices are expected to fall as we head towards the middle of the year. This, in turn, raises the risk that sugar could be dragged lower as Brazilian sugar/ethanol production ramps up in April/May.
Watch out – oil prices rally on Middle East conflict
With ethanol remaining a key driver of the sugar market, oil prices remain a key point to watch. The escalation of tensions between the US and Iran have driven oil prices up from lows of close to US$55/bbl to more than US$70 (as of 2 March). The recent escalation could see prices rise further if oil infrastructure is damaged or the transportation of oil through the straits of Hormuz, through which around 20% of global supply is shipped, is disrupted.
There are two possible ways in which sugar prices could be affected by the conflict:
- Higher oil prices could feed through to higher ethanol prices in Brazil, raising ethanol prices and therefore for sugar. The Brazilian government tries to smooth oil price volatility on domestic fuel prices by not passing on price increases immediately. However, if market participants adjust their expectations for oil prices, it could nevertheless support the floor for sugar prices as ethanol supply ramps up.
- A ‘flight to safety’ could see global investors take their money out of risky assets. In this scenario, speculators could buy back the short positions they have taken up in the sugar market. This could provide some short-term support to sugar, but there is plenty of producer selling that will at least partially absorb this.
With the conflict at such an early stage, it is unclear how long it will last and what the end game is. While stronger oil prices are helpful for sugar, it does not appear to be a game changer for the sugar market but, depending on future developments, it could yet create short-term opportunities for the index-linked beet price.
Positive news on the horizon?
There is no doubt that the past 12 months have been tough for growers and producers around the world. World prices are below the cost of production for most producers and, eventually, this will have an impact on global production.
Both the EU and Thailand are expected to reduce area in 2026/27. There is also the growing risk of an El Niño weather pattern, which can be negative for global sugar production, in the second half of the year.
For the moment, this is too far away and too uncertain to have an effect on prices, but we will continue to update you on developments.
EU market developments
In the EU, the 2025/26 harvest is coming to an end across Europe and, while final figures are not yet available, there do not appear to have been any late surprises; prospects remain for a very good crop this year. As a result, spot prices have remained low.
The price reported by the European Commission in Northwest EU was €509/tonne in December. UK prices normally trade at a premium to this price, but it is not clear whether they have been high enough to trigger the market-linked bonus for 2025/26 which is set at €575/tonne.
With EU and UK production roughly matching consumption, and imports exceeding exports, it is expected that both the EU and the UK will end the crop year in September with high stocks.
The EU’s production base continues to restructure in light of falling demand. At the beginning of February, Nordzucker announced that its factory in Slovakia would close its doors at the end of the season. More recently, CoProB in Italy has announced that production at Pontelongo will be temporarily suspended in 2026/27.
Beet area in the EU and UK is still expected to fall in the region of 7%, bringing it to the second lowest level since the 2017 reforms. This should see the bloc return to a deficit in 2026/27. There are also some factors that could help limit the amount of duty-free sugar coming in next year.
- Last month, we highlighted the influence of IPR sugar on imports and the suggestion that is could be suspended. It now seems likely that the Commission will stop short of doing this. However, it could still introduce measures that will control better these imports, reducing the amount that comes into the EU market.
- China recently announced that it will offer duty-free access to its sugar market for most African exporters. Sugar prices in China are higher than the EU; this could see some South African sugar that normally heads to Europe going to China instead.
Both these factors could help to reduce duty-free imports, which could help support the EU/UK price premium above the world price. However, with lots of unknowns, not least consumption this year and the amount of stock to be carried into next, this remains in the balance for now.
A trader’s view
NFU Sugar Board appointee and sugar trader Paul Harper shares his thoughts on the current market situation.
NFU Sugar Board appointee Paul Harper
Paul has spent his entire career in commodities and has been in sugar since 1976. He joined C Czarnikow in 1973 working in their London, New York and Singapore offices. Paul has a huge amount of consultancy experience, having consulted for a hedge fund, major bank and a large trade house in sugar during that time.
The market made new lows in February, fuelled largely by aggressive speculative selling.
At one point this element held a record short position in excess of 265,000 lots, the equivalent of more than 13.5 million tonnes and although this has been reduced slightly it is still a significant short position.
Demand remains weak despite the lower price levels and this has aided the bearish sentiment.
Having made new lows, the market has recovered some of the losses in the last few days and, at the time of writing, unrest in the Middle East has encouraged more short covering. This can largely be attributed to “risk off” due to the uncertainty of the situation as fundamentally the situation has not changed.
Reports that Brazil is likely to produce more ethanol as the current crop comes to a close along with firm local prices in India, where crop estimates are also being reduced has encouraged more of the shorts to take some cover.
Looking further forward, despite the reductions in production, particularly in India, the market still remains in surplus as the next Brazilian crop gets under way and without any major changes on the supply side, it is likely to remain so through 2026 and into 2027.
Policy perspective
NFU26 Sugar fringe: Resilience in a post-neonicotinoid world
- This year's NFU26 Conference sugar fringe considered the pest and disease challenges of today and tomorrow.
- Professor Mark Stevens from the BBRO and Vincent Laudinat from ITB considered the control options available to growers in a post-neonicotinoid world and reflected on the next generation of controls currently under trial at their respective research organisations.
- The session also featured NFU Sugar Board Chair, Kit Papworth, who reflected on the wider policy landscape and the support the sector requires from government to ensure its resilience into the future.
The Beet Brief from NFU Sugar is prepared for UK sugar beet growers only. While every reasonable effort has been made to ensure the accuracy of the information and content provided in this document at the time of publishing, no representation is made as to its correctness or completeness. The NFU and the author do not accept liability arising from any inaccuracies, be they errors or omissions, contained within this document. This document is intended for general information only and nothing within it constitutes advice. It is strongly recommended that you seek independent professional advice before making any commercial decisions.