Global Raw Sugar Rallies while Domestic Futures Stay Muted, Supply Expectation Gap Shapes Market Trajectory

China Securities Journal reported that raw sugar contracts on the Intercontinental Exchange surged over the national holiday period, breaking through 20 US cents per pound and touching a 19-month high. In contrast, domestic Zhengzhou sugar futures failed to sustain the upward momentum after the holiday and traded within a narrow range following a brief jump.

The most active March ICE raw sugar futures contract hit 21.24 US cents per pound on 7 October, the highest level recorded since 26 February 2025. The contract gained more than 8 per cent across early October. Tighter supply expectations underpinned the global rally. Reduced output from Brazil’s key sugar-producing regions, logistical disruptions at ports and a stronger Brazilian real curbing export volumes combined with El Niño-linked dry weather, which raised forecasts of lower harvests in India and Thailand. Heavy rainfall in Brazil’s central-southern belt was set to hamper cane crushing activity over the next three months. Although cane yields remained solid, slower processing was expected to pull total sugar output down, with sugar extraction ratios staying low.

Dry conditions in India’s southern cane areas had already damaged crop development, while Thailand’s eastern growing regions faced milder rainfall shortages. The projected harvest losses in both nations were seen as supportive for international sugar prices. Nevertheless, existing buffer stocks and ethanol production capacity in India, Thailand and the European Union would limit immediate global supply tightness, with a pronounced market shift towards shortage unlikely before the first quarter of 2027.

Domestic sugar futures showed a weaker response. The main Zhengzhou sugar contract opened higher after the holiday and briefly moved above 5,500 yuan per tonne before retreating. It settled at 5,491 yuan per tonne on 9 October, with a rise of more than 2 per cent across two trading sessions, lagging the sharp advance in overseas markets.

Domestic market conditions were shaped by high inventories and forecasts of larger production for the 2026/27 crushing season. Industrial stockpiles remained elevated, and slow sales from sugar mills kept pressure on nearby futures contracts. Ample rainfall in Guangxi had fuelled projections of a fourth consecutive annual rise in domestic sugar output, narrowing the country’s production-consumption gap. New crushing was due to start earlier than usual, adding further pressure to clear old inventories. Hedging activity was expected to cap gains on the January Zhengzhou sugar futures contract.

Limited room for price falls remained on the domestic market, backed by firmer overseas fundamentals and tighter administrative controls on imports of sugar and syrup. Domestic sugar prices would still track global raw sugar trends over longer periods, though local expectations of higher output would keep the domestic market underperformance intact.

Discrepancies between projected harvest volumes and actual yields represented a core variable. Remote sensing and rainfall data from September suggested cane growth in Guangxi might fall short of prevailing market estimates. Any undershoot in domestic sugar production would alter the pricing dynamic for Zhengzhou sugar futures, switching the main driver from overseas-led gains to a combined domestic and international fundamental story. Cane crops were still in the growing phase, and final production figures remained subject to change.