The world market situation
October futures have continued to soften over the past month and, at the time of writing, prices are between 16 and 17 cents/lb. As we have argued in previous editions of the Beet Brief, prices should find support at this level.
This is because as raw sugar prices move into the 16s, the incentive for mills in Brazil to produce sugar rather than ethanol starts to weaken. This, in turn, reduces expectations about future sugar supply.聽
With this in mind, sugar producers have scaled back their hedging. However, speculators have continued to sell, pushing prices lower. As of Tuesday 10 June, these funds were 91,000 lots net short; in other words, they are holding a net short position the equivalent of 4.5 million tonnes of sugar.
As the diagram below shows, these speculators can have an important influence on short term price direction.
Net speculative position vs. No.11 raw sugar price
Source: Globaldata聽聽
Who are these 鈥榮peculative funds鈥�? Simply put, speculators are normally investment funds that do not have physical sugar to sell, nor do they want to buy it. Instead, they look to make money by 鈥榖etting鈥� that prices will either rise or fall.
Not all funds are the same. Index funds typically hold long positions to track the value of a commodity over time. Discretionary funds base their investments on human decision making. However, most funds do not do this.
Instead, they use algorithms that respond to price trends. By following the trend, either up or down, they amplify price moves, sending prices higher or lower than one might expect based on the supply/demand picture alone.
The current challenge facing the sugar market is that 鈥榯rend following鈥� funds have been in charge, and the price trend they have been following has been downwards. Therefore, while many market commentators argue that prices below 17 cents/lb look cheap given the current supply/demand situation, prices have remained under pressure. And recent supply/demand developments have been insufficient to turn things around.
- The weather had generally been supportive for 2025/26 crops in the major producing countries, reducing concern about future supply.
- Brazil鈥檚 2025 harvest is up and running. While cane quality is low, the amount of cane being diverted to sugar is higher than last year, which is compensating for this.
- Import demand from Asia, notably Indonesia, has been weaker than expected.
In this context, the market has continued to transition from a period of tight supply in the first half of the year to what looks like a more comfortable situation in the second half.聽
At the same time, the UK pound has strengthened further against the US dollar, with the threat of tariffs still hanging over prospects for the US economy. This continues to add further downward pressure on the futures linked beet price for October 2025.
Can prices stage a recovery before October expires?
For this to happen, we need a trigger to encourage the funds to buy back their short sales. In addition to adverse weather events, there are some possibilities to watch out for:
- There remains a risk around the size of this year鈥檚 cane crop in Brazil. Czarnikow, for example, has recently reduced its estimate. However, there is little consensus at this stage, with others believing that prospects are improving. Further ahead, low prices in the short-term could result in less sugar production and be bullish later on, but this will not be apparent for several months.
- Israel鈥檚 attack on Iran has resulted in oil prices moving sharply higher. This could feed through to higher ethanol prices in Brazil, which would be supportive for sugar. However, Petrobras, the state-owned fuel company, which sets the gasoline price in Brazil, tends to react slowly to world price movements.
In short, while there are factors that should offer support prices going forward, the prospect of a significant recovery before the end of August is far from certain. The new range for October 2025 futures looks to be 16-18 cents/lb, which translates into a futures-linked beet price of just 拢19-24/tonne.
The EU-UK market situation
The arrival of rain in the beet belt has been a relief to beet farmers across northern Europe.
While the dryness offset to some extent the benefit of early planting, the rainfall has improved the crop prospects. Beet area could fall by as much as 7-10% lower across the bloc. At the same time, there are signs that consumption looks to be better than last year, when demand was hit by a wet summer and high prices agreed in 2023.
Spot prices for 2024/25 sugar remain broadly unchanged at 鈧�570/tonne, ex-works Northwest EU. For 2025/26 sugar, processors are keen to achieve higher prices 鈥� around 鈧�600/tonne 鈥� in order to improve their financial situation. With world prices having softened and the euro remaining strong, this is currently above the cost of importing and refining sugar from countries with duty-free access.
By trying to keep prices above the cost of imports, there is a risk that this strategy results in more imports entering the bloc. However, there is only a limited volume of duty-free sugar that can enter, and the re-imposition of limits on imports from Ukraine will help to control these volumes. For the moment, this fact, along with the sizeable cut in area, is encouraging processors to hold their position when negotiating with sugar buyers.
A trader鈥檚 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 would appear to have few friends at the moment!聽
Prices have continued to fall with further selling from the funds whilst the trade sit on the side lines and demand remains soft.
The market traded below 16 cents/lb in New York for the first time in a long while (four years) and it will be interesting to see if any demand is forthcoming at the lower levels.聽
Little has changed from a fundamental point of view; the South Brazil crop continues its鈥� slow start, although there is time for improvement.聽
India is experiencing good rains although there has been no change so far in export availability and these numbers are unlikely to alter with the market at lower levels.
Rains in Northern Europe and the UK have been welcome after a dry start to this years鈥� crop, although expectations continue for a lower crop than last year.
While the funds continue to sell, further downside moves are possible. The market needs some consistent demand to help arrest the decline, which in turn, could force some short covering by the funds.
However, from a technical standpoint, the market continues to look bearish.
The current futures-linked beet price sits close to 拢20 which is around the lowest level seen so far this year.
May: raw sugar price around 17 cents per pound.
Taken from the World Association of Beet and Cane Growers鈥� Flashmarket newsletter on 5 June, by Timoth茅 Masson, Executive Secretary of WABCG and economist for the French beet growers association, CGB.
Since the beginning of the year, volatility has been the norm on the world markets. May was no exception.
Over the month, the price of raw sugar fell by 2%, and this trend continued into early June.
On 22 May, a USDA report forecasting a bumper harvest in India prompted speculators to sell. This has had a significant impact on raw sugar, which has fallen below 17 cents/lb for the first time in five years. However, the same report predicts that world stocks will be below 39 million tonnes at the end of the marketing year in October 2025, which is an exceptionally low level. By the end of October 2026, these stocks are expected to reach only 41 million tonnes, which is almost 10% less than in October last year (45 million tonnes).
Furthermore, the forecaster anticipates that more than 8 million tonnes of this stock will be in India, despite its booming ethanol market. On 4 June, S&P revised its world balance sheet, making it even tighter. The current crop year (October 2024 to September 2025) is forecast to have a deficit of -3.8 million tonnes, which is the largest deficit since 2015/16. The following marketing year (2025/26) is expected to see a small surplus: +1.9 Mt, which is less than last year.
In short, there is a sense of uncertainty, making it difficult to predict market trends, but the general feeling is that the current situation is quite severe.
Furthermore, the unknown factors at work in the Brazilian campaign are not helping matters. For the first month and a half of the campaign (1 April to 15 May), UNICA reported lower yields (-5%) and that 20% less cane had been processed compared to last year.
It should be noted, however, that other factors are calmer. Currencies are slightly less turbulent than last month, as are grains.聽