September 2026 Sugar Market Commentary
Tension over sugar supply is building, but the market is waiting for more certainty before the next rally. The story is that Brazil is improving, but India and Thailand supply is still unresolved until harvest commences. After the sharp rally in August, September held some of those gains but largely played a waiting game, with the Mar 27 contract trading in a range of 18-19.90 c/lb. However, across the month price fell only 1.17%, it started the month of Sept at 18.81 and closed 18.59 on Sept 30. Our near-term view is now more neutral, while our longer-term view remains bullish if India and Thailand start printing weaker yields or recovery rates.
We do not have enough conviction to make a call on either direction in the near-term. Brazil has room to produce more sugar, with the scenarios below showing potential production outcomes under different assumptions for the end-season sugar mix.
We would not be surprised to see sideways trade while the market waits for clearer harvest numbers from India and Thailand. The 18 c/lb area remains a level we are watching and has bounced off twice now, providing support for that floor. The 20 c/lb is an upside test if the supply tightens again.
Funds over the last three reports have slowed their length building and have actually pulled back, with around 21k gross long contracts liquidated over the same period. This was interesting as shorts did not come off but rather remained flat. As the rally came to a halt, early specs that hopped on the bandwagon have jumped off, with OI down 277k contracts over the last three reports. We expect OI to keep falling, with further fund liquidation, until further harvest data is released.
For now, the market needs another reason to move. That reason is likely to come from Brazil’s late-season supply response or the first clearer production numbers out of India and Thailand. Brazil being the more imminent swing factor, we have kept a careful watch on the model forecasts and fundamentals.
Brazil still holds the key
Turning the mix sharply toward sugar is easier to discuss than to deliver. The cane available, the sugar in that cane and the economics of sugar against ethanol all need to line up. More cane through the mills helps, but it is only one part of the picture.
Our GSX models through to the end of August show around 420 MMT of cane crushed, which is 63% of available cane leaving us with roughly 37% for the rest of the season. As for sugar produced, we have 24.12 MMT which leaves the end-season sugar forecast at 41.23 MMT. These are our working model estimates. The forecast still requires another 17.11 MMT of sugar, so the final stretch of the season matters.
The question is whether Brazil can sustain the improvement for long enough to materially change the story. That takes us back to the mix, where the most recent fortnight is more encouraging than the early part of the season.
The mix is improving but the job is not done yet
Cumulative cane crushing in our model is 4.35% above the three-year average, while the sugar mix has improved to around 46.2%. However, rain continues to challenge Brazil’s Centre-South harvest. Published estimates put harvest days lost in May-July at 13, compared with 6 days last season and 5 days for the 10-yr average. Disruption eased to 1.6 days in August, before rising to an estimated 7.3 days in the first half of September.
The key question is whether Brazil can maintain the pace of cutting and crushing as the season progresses. Further rain delays could leave more cane unharvested and limit sugar output, despite the improved mix. The outcome will depend on the remaining harvest window and whether the cane still to be processed carries enough recoverable sugar to sustain that improvement.
For Brazil, the concern is whether forecasted rainfall causes even greater harvest delays than those seen earlier this season. This could lead to more harvesting days lost, potentially less cane harvested and ultimately less sugar produced.
A higher mix would lean against our bullish view, but the tonnes are what finally matter. Ethanol remains a reason why mills may not push sugar as hard as the market would like, even when the cane is there.
Ethanol keeps a hand on the mix
Brazil moved from E30 to E32 on 1 August, initially for 180 days, with provision for another 180 days. This adds around 450-500 million litres of anhydrous demand over six months (900 annualised). This is equivalent to 0.75-0.85 million tonnes of sugar if supplied entirely from cane. The mandate keeps anhydrous demand high; however, hydrous is the key one for the mix. Over the next 6-12 months, corn ethanol adding to supply may ease the pressure on sugarcane ethanol. However, for now, higher anhydrous demand still competes for the same cane, which puts a floor under ethanol demand and makes a sharp swing toward sugar less likely.
Ethanol parity is still favouring hydrous at the pump. Our weighted ratio is around 65.8%, below the conventional 70% level. Under that efficiency assumption, ethanol remains competitive for the consumer, which helps keep demand in the picture. The demand supports ethanol returns relative to sugar at the mill, and it could limit how far Brazil’s sugar mix rises, leaving fewer additional sugar tonnes available for export.
Rains in Brazil have cost harvest days and tightened ethanol and sugar supply in the short term. As crushing resumes, that pressure has eased, helped by corn ethanol supply. The price charts show a modest pullback in the daily Paulinia hydrous series after a sharp rebound, reflecting improved supply as crushing resumes, even as the higher sugar mix diverts cane away from ethanol.
India and Thailand still have their say
As the Monsoon comes to an end, concern remains over what this means for cane harvest levels. Indian crushing, expected to start around mid-October, remains a watchpoint and will reveal recovery rates and yields, potentially leading to some volatility in flat price. For Thailand, our working estimate of around 10.5 MMT of sugar still needs to be tested against the cane and recovery that come through the mills.
El Nino is now very strong, with September updates reporting a weekly Nino 3.4 anomaly around +3.0°C.
The Monsoon outcome will show up in India’s 2026/27 crush, but the fuller El Nino effect on India and Thailand production is more likely to be realised in the 2027/28 harvest. That makes El Nino more of a risk premium the market may hold ahead of the 2027/28 crop than a near-term supply shock.
Lookout in October
Our short-term view remains neutral rather than outright bearish. Brazil had a good run from mid-July through August, helping improve the supply situation, but that needs to continue. The sugar mix over the remainder of the season needs to average the levels required in our scenarios, alongside continued cane crush, to bring the balance sheet back towards neutral. Delivering those additional sugar tonnes still means navigating continued ethanol demand and potential bad weather. If Brazil achieves that, improved supply could weigh on prices, while India and Thailand’s harvest results will help settle the broader supply picture.
Longer term, our view remains bullish if India and Thailand confirm lower yields or sugar recovery rates and that translates into tighter export availability. In that case, we still see room for No.11 to move back through 20 c/lb. It remains a scenario to be tested, rather than a target we expect regardless of the crop outcome.
We would lean bearish if Brazil sustains its crush and a higher sugar mix delivers more sugar out of the mills, while India and Thailand print stronger harvest numbers than expected. If ethanol becomes less attractive to Brazilian mills, that could also help more cane move towards sugar. Those developments would make us reassess the longer-term view.
Our focus will be on the ethanol situation in Brazil, the continued Brazilian crush, and the harvests in India and Thailand. We will watch whether there is a rise in Brazil’s sugar mix, whether the crush keeps enough cane moving through the mills, and how yields and recovery rates develop during harvest in India and Thailand. The key question is whether enough sugar comes through for export to bring the balance sheet back towards neutral.
The views, opinions and market commentary expressed in this article are solely those of the author and are provided for general information purposes only.
