Rising gasoline prices are pushing up ethanol rates and lending support to global sugar prices, even as concerns over excess supply continue to weigh on the market, Barchart reported.
Gasoline prices climbed more than 5 per cent on Friday, touching their highest level in three-and-a-half years. The increase is expected to encourage sugar mills across the world to divert more sugarcane towards ethanol production, which could reduce sugar output.
At the same time, supply concerns have added strength to prices. Disruptions linked to the closure of the Strait of Hormuz have affected global trade flows. According to Covrig Analytics, around 6 per cent of the world’s sugar trade has been impacted, tightening the availability of refined sugar.
Earlier this month, sugar prices had fallen to their lowest level in more than five years, as markets reacted to expectations of continued surplus production. On February 11, analysts at Czarnikow projected a global sugar surplus of 3.4 million metric tonnes (MMT) for the 2026–27 crop year, following an estimated surplus of 8.3 MMT in 2025–26. Other estimates also point to excess supply, with Green Pool Commodity Specialists forecasting a surplus of 2.74 MMT in 2025–26 and a smaller surplus in the following year. StoneX has projected a surplus of 2.9 MMT for 2025–26.
The International Sugar Organization (ISO) has also indicated a shift towards surplus. In its February 27 outlook, the body projected a global sugar surplus of 1.22 MMT for 2025–26, compared to a deficit of 3.46 MMT in the previous year. The increase is expected to be driven by higher production in India, Thailand and Pakistan, with global output seen rising by 3 per cent year-on-year to 181.3 million metric tonnes.
There are also signs of reduced output in Brazil, which are supporting prices. Data released by Unica on February 18 showed that sugar production in the country’s key Center-South region dropped sharply in the second half of January. However, overall output for the season so far remains slightly higher compared to last year.
In India, production trends remain strong. The Indian Sugar and Bio-energy Manufacturers Association (ISMA) reported that sugar output between October 1 and March 15 rose by 10.5 per cent year-on-year to 26.2 MMT. The association has estimated total production for 2025–26 at 29.3 MMT, which is higher than last year but lower than its earlier projection. It has also reduced its estimate of sugar diverted for ethanol production, which could leave more sugar available for exports.
Higher export availability from India may put some pressure on global prices. In February, the government allowed additional sugar exports for the 2025–26 season, adding to the quota already announced earlier.
Looking ahead, global production is expected to remain strong. The United States Department of Agriculture has projected that worldwide sugar output will reach a record level in 2025–26, while consumption is also expected to rise. However, global stock levels are likely to decline slightly during the same period.
Overall, the sugar market is balancing between rising demand for ethanol and supply-related concerns on one hand, and expectations of surplus production on the other.
