• Sugar hits five-month high at 15.94 cents per pound
• Oil-driven ethanol shift in Brazil tightens global sugar supply
• Strait of Hormuz disruption cuts trade, supporting price gains

The Middle East crisis is indirectly supporting sugar prices, with raw sugar futures hitting a five-month high of 15.94 cents per pound on March 26, surpassing a previous peak of about 15.91 cents reached earlier in the week.

The rally is being driven by rising oil prices amid tensions between the United States, Israel and Iran.

Higher crude prices are improving the economics of ethanol, prompting sugar mills in Brazil, the world’s top producer, to divert more sugarcane to biofuel production. This shift is tightening global sugar supply and supporting prices.

Supply disruptions linked to the closure of the Strait of Hormuz are adding to the upward pressure. According to Covrig Analytics, the disruption has reduced global raw sugar trade by about 6%, thereby limiting refined sugar output.

The recent gains have outweighed a sharp selloff earlier this month, when sugar fell to its lowest level in five and a half years on expectations of a global surplus.

According to late-January forecasts from broker StoneX, the sugar market surplus for the 2025/26 season, which began in October, is projected at 2.86 million metric tons. Global production is expected to reach 196.7 million metric tons, while demand is forecast at 193.8 million metric tons.

Analysts say prices need close monitoring in the coming weeks, given both the geopolitical backdrop driving energy markets and elevated speculative activity.

Data from AP Commodities shows many funds are currently positioned for a price decline. If those positions are unwound, a wave of short-covering could trigger sharp rebounds, particularly as the market remains highly sensitive to weather conditions and ethanol margins.

Espoir Olodo