The international situation has drawn our attention to food and fuel security. As the world was recovering from the Russia-Ukraine tensions, the escalation in West Asia is a wake-up call for countries to commit towards food and fuel security.
Fortunately, India produces record agri-products- paddy and wheat production have been surpassing each year in the country.
However, India continues to be dependent on fuel imports, triggering fear amongst the Government and industry circles about sustainability with the given oil reserves in the country.
Another important challenge that begs attention at this time is the crude prices, which have seen a steep increase in just one week, with fears of war prolonging and the closure of the Strait of Hormuz.
The Iran conflict has disrupted shipping routes in the Gulf and raised supply concerns across energy and food markets. Sugar prices have sharply increased recently amid soaring crude oil prices. Sugar markets reacted as higher oil prices may push Brazil to divert cane toward ethanol production, rather than sugar, thus curbing sugar supplies.
When Russia invaded Ukraine in early 2022, crude oil prices spiked sharply. The last time we witnessed a sharp rally in crude oil was between early January and late February 2022. Crude rose from the high $70s to breach the $100-per-barrel mark just as geopolitical tensions in Ukraine escalated, creating a surge in energy prices worldwide. During this period, sugar prices also followed a volatile trajectory.
Last week, ISO, in its quarterly report, projected a modest sugar surplus in the world, buoyed by higher consumption in the USA.
The forecast and the emerging crude prices to ethanol production scenario paint a conducive picture for the Indian sugar finding takers in sugar-importing nations.
Brazil plays a key role in global sugar markets, and its decisions on sugar and ethanol production make it the centerpiece of price movements whenever crude oil prices rise.
The sugar premium over hydrous ethanol has slipped into negative territory for the first time in 44 months and has continued to remain there, driven by a rise in ethanol prices. Although the premium recovered slightly during the month, it remained negative overall.
For the 2025-26 season, Brazilian mills initially prioritised sugar production, with the sugar mix peaking at nearly 55% in the second half of August. However, with sugar now trading at a discount to ethanol, the diversion towards sugar is likely to moderate, with the sugar mix expected to hover around 48% in the upcoming season.
Pump parity in São Paulo has edged up slightly from 72.2% to 72.4% over the past month, remaining above the key 70% threshold for the first time in nearly 30 months. This level is widely regarded as the tipping point at which ethanol becomes less price-competitive relative to gasoline, potentially influencing consumer fuel preferences.
With parity holding above this threshold and crude oil prices trending lower, hydrous ethanol consumption is likely to moderate in the near term, particularly as seasonal demand patterns soften. As a result, ethanol demand may ease in the coming months.
Moreover, with Brazil entering a general election cycle, there is an increased likelihood that gasoline prices will remain contained, either through policy intervention or pricing restraint. Lower gasoline prices would further narrow ethanol’s relative advantage at the pump, potentially exerting additional pressure on hydrous ethanol consumption.
Lower-than-anticipated domestic production has tightened the overall supply–demand balance, even though consumption has remained relatively subdued. With sugar output now projected to decline compared to earlier estimates, export volumes are expected to remain broadly in line with last season, making the overall balance significantly tighter than it appeared two months ago. Consequently, closing stocks are likely to remain broadly comparable to last year’s levels.
Sugar exports from the Center-South region of Brazil in the 2025/26 season are projected at around 32.0 MMT, marginally higher than the 31.65 MMT shipped in 2024/25. The slight increase largely reflects stronger export flows during the October–November–December (OND) 2025 period.
With total sugar output broadly aligned with initial estimates and no significant revisions expected, export availability is likely to remain only modestly above last season’s levels.
The global sugar balance for 2025-26 is projected to remain in surplus at around 1.3 MMT, although the excess is smaller than earlier estimates. The downward revision primarily reflects lower output among key cane producers such as India, where weather variability, crop stress, and shifting milling economics have constrained production.
Part of this shortfall is expected to be offset by improved conditions elsewhere. More favourable weather across parts of Asia and better-than-anticipated beet yields are supporting production in the European Union, United Kingdom, Russia, and Ukraine. Smoother campaigns and improved recovery rates in these regions are helping lift overall output prospects.
Overall, while the projected surplus has narrowed, stronger beet production and selective recovery across parts of Asia could help stabilise—or even modestly widen—the global balance later in the season. Final outcomes will depend heavily on late-season weather developments and the pace of cane diversion toward ethanol in Brazil.
