We believe current low sugar prices globally are pricing in maximum bearishness. ICE Mar26 Sugar futures ended the session on Friday at USc 14.1/lb, which marked the lowest close on the first position contract since the end of 2020. Current market sentiment of widespread expectations for the new season to return a global surplus continues to increase, speculators are believed to have driven selling pressure. Producer hedging in Brazil as well as in other producing areas, including Thailand and Central America remains behind the seasonal pace according to anecdotal reports, which could well be providing speculators with some reassurance that potential short-covering rallies would be met with fresh origin selling pressure. Market is currently assuming that production in each of Brazil, India, and Thailand is expected to increase period-on-period in tandem over the next twelve months. We believe this to be not true as weather conditions in all three countries have had a strong monsoon for continuous 3 years now and are poised to see a failure in monsoon in either of the 3 regions above. The fact that raw sugar futures prices have recently fallen to their lowest level in 5 years, mills in Centre-South Brazil, the world’s largest cane growing region, have started making ethanol at the expense of sugar. If these low sugar prices are sustained into 2026 it’s possible that Brazilian sugar production in 2026/27 could be materially lower. We also believe that demand for finished product stocks around the world will rebuild now that sugar prices are half what they were at their 2023 peak. This should also provide some support to sugar prices. For above reasons we see 2025-2026 sugar production outpacing demand by 7 million tonnes where as market pricing is currently around 8.5-9 million tonnes. Positioning wise, money managers have decreased their bullish white sugar bets by 4,818 net-long positions to 18,728 as per ICE data. This is least bullish in last 17 weeks. The long-only total was the highest in three weeks where as the short only was the highest in 9 months. Technically the 14.10 level is the 76.4 % retracement level of the entire up move from decadal lows of 11.77 to decadal highs of 22. Trade Summary: Long Sugar (CMP 14.10$/lb), TP 18$/lb & SL 11.85$/lb. Risks to the view: A strong monsoon across Brazil, India & Thailand simultaneously.
