Raw Sugar Prices Weaken as Falling Oil Shifts Production Focus

Raw sugar futures declined on Wednesday, pressured by a drop in crude oil prices that alters the production economics for sugarcane mills in key growing regions. The move suggests a potential increase in sugar output at the expense of cane-based biofuels.

Market Dynamics

The benchmark raw sugar contract SBc1 fell 0.3% to settle at 17.88 cents per lb. The drop is directly linked to weaker crude oil markets, which makes producing ethanol—a biofuel derived from sugarcane—less profitable for mills in major producers like Brazil and India. When oil prices fall, these mills are more likely to divert sugarcane processing toward producing sugar, increasing its supply on the global market.

Reflecting the broader trend, October white sugar LSUc1 also dropped 0.4% to $524.20 per ton. The front-month white sugar contract, LSUV6, had expired on Tuesday at $522.30, down 0.5%.

Global Supply Outlook

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Despite Wednesday's decline, sugar prices remain near a recent 16-month high. According to dealers, the market continues to find support from expectations of significant production declines in other key areas, including India, the European Union, and Thailand.

Underscoring these supply concerns, France's farm ministry has forecast that the country is headed for its smallest sugar beet harvest since the 1970s. The projection follows severe heatwaves and drought that damaged crops in the EU's largest agricultural producer.

Contract Deliveries

Following the expiration of the October white sugar contract, preliminary information from sugar traders indicated that deliveries totaled 9,987 lots. This volume is equivalent to 499,350 metric tons of the refined sweetener.