Oil prices and geopolitical tensions are providing cautious support to the sugar market. At the same time, ample sugarcane production in Asia is slowing the price recovery. Read more about the impact of oil on the sugar market.
After a dip in sugar prices in mid-February to their lowest point in about five years, the market is on the rise again somewhat. However, it is not doing so wholeheartedly. A substantial harvest, particularly of sugarcane in Asia, is putting a slight brake on the market. Tensions in the Middle East, and especially the closure of the Strait of Hormuz by Iran in response to the American and Israeli attacks, could provide additional support to sugar if things continue for much longer.
The latest sugar balance from the International Sugar Organization (ISO) is moderately bullish for the sugar market. The surplus for the 2025/26 season is now estimated at 1,2 million tonnes, compared to 1,6 million a month earlier. According to ISO, the balance deficit for the 2024/25 season comes in at 3,5 million tonnes, compared to 2,9 million tonnes in the previous forecast.
There is no sign of a recovery on the physical European sugar market yet. The European Commission's figures are lagging somewhat, but compared to December, the price fell by €2 to €516 per ton. By comparison, the sugar price stood at €559 in January of last year. Incidentally, this concerns the average ex-factory price for granulated sugar delivered in bulk or big bags.
Biofuel
According to the Indian Association of Sugar and Biofuel Producers, India produced 24,75 million tonnes of sugar from October 1 to February 28. This puts the yield 12% higher than over the same period last season. Total production for the current season is estimated at 29,3 million tonnes, compared to 30,95 million tonnes in the previous estimate. In this estimate of March 6, the ISMA still assumed that less sugar would end up in the ethanol. However, if crude oil prices remain stable, that could change, the organization now writes.
High fuel prices are, of course, not only affecting India or us. In Brazil, the world's largest sugar producer, the high cost of gasoline is also being felt. It is still too early to put figures on it, but analysts here also expect that more sugarcane will be turned into ethanol if oil remains relatively expensive. From a grower's perspective, it is a blessing in disguise that energy provides a way out for a surplus of sugar in this way.
Fickle president
Under the current American president, policy can of course change quickly, but it does not look like there will be a quick end to the war in Iran. In fact, NATO had previously been all but written off by Trump, but in an interview with the Financial Times, Trump stated that NATO faces 'a bleak future' if members of the alliance do not step in to reopen the Strait of Homuz. Let us hope for Trump's sake that his adventure in Iran does not turn out the same way as it did for Jimmy Carter, the previous American president who carried out military action in Iran.
Besides oil, various countries in the Middle East are also major players in the fertilizer market. Growers are feeling the pinch. Last week, the Brazilian fertilizer producer Agrion Fertilizantes launched a plan to produce fertilizer from residual streams of the sugarcane chain. With this, the fertilizer supplier aims to make Brazil less dependent on imports of fertilizer from abroad. Of the more than 40 million tons of fertilizer the country imports, approximately 85% comes from abroad. Agrion Fertilizantes has the ambition to produce up to 500.000 tons of fertilizer from sugar industry waste by 2031. The company currently has a production capacity of 40.000 tons per year. Of course, compared to total Brazilian fertilizer consumption, this does not represent a very large portion that can be replaced in this way.