In India, even before the start of the festive season, sugar prices are rising, casting a shadow over the atmosphere. Although the government claims that prices are not increasing due to ethanol, problems with sugar availability have arisen. As a result, the country, which is a major global sugar exporter, is now forced to import it.
According to government data, the rise in sugar prices is caused by a combination of several factors: lower domestic production than forecast, increased demand before the holiday season, damage to sugarcane crops due to weather conditions, a deficit in global sugar supply, as well as speculation and stockpiling by some industry groups.
It is expected that this season's sugar production will be around 306 million metric tons (LMT), compared to the initial estimates from sugarcane producers of approximately 343 LMT. The sugarcane harvest was affected by diseases such as Red Rot and the Top Borer pest. Furthermore, flooding due to premature heavy rains damaged the crops. Nevertheless, the government states that despite the decrease in production forecasts, there are sufficient sugar reserves in the country to meet domestic demand until the start of the new crushing season in October.
Global Sugar Price Increase
However, the surge in sugar prices is not only happening in India; the sugar crisis is spreading globally. Problems are also emerging in Brazil, a country that is the world's largest sugarcane producer. According to the US Department of Foreign Agriculture Service, Brazil produces 24% of the world's sugarcane volume, while India ranks second with 16%.
Potential Impact on Global Sugar Supplies
A sugar crisis has emerged in Brazil because the country is redirecting its cane towards ethanol production. According to the Brazilian National Supply Company (CONAB), a reduction in sugar production of about 3% is expected, meaning a decrease in production in Brazil of approximately 43 million tons this year. Another reason is El Niño, which has affected the cane harvest in the central and southern regions of Brazil due to delayed rains and rising temperatures. Thus, the trend among farmers in Brazil, a major sugar exporter, to switch to ethanol may affect the global sugar supply chain.
Weather Worsens the Situation
In other countries, the rise in sugar prices is also driven by weather conditions. According to a report by Valor International, the active El Niño this year is having a negative impact on sugar-producing regions. Climate change is affecting sugarcane producing regions, such as India and Thailand. In Thailand, where 6% of the world's sugarcane is grown, adverse weather is expected starting next week. There are concerns that El Niño will lead to a decrease in rainfall.
According to the American commodity market, futures prices for sugar in the US are trading above 17 cents per pound and remain close to the highest levels since May 2025. The market is supported by the probability of further restrictions on global sugar supplies. Moreover, the strongest El Niño in decades has increased production risks. Analysts have raised their forecasts for global sugar shortages in 2026/27. Due to smaller plantings of sugarcane and sugar beet, this shortage could increase even further in 2027/28.
Reasons for Brazil's Shift to Ethanol
India, the European Union (EU), and Thailand are considered the regions most sensitive to adverse weather conditions. At the same time, high crude oil prices are stimulating large sugar-producing countries like Brazil to shift cane from sugar production to ethanol production. Brazil increased the mandatory ethanol blending rate to 32% at the end of July, up from 30% a month ago and 27% a year ago. This could lead to a further reduction in sugar availability and intensify pressure on global sugar demand.