A SEVERE FROST OR DROUGHT IN BRAZIL, OR A DISAPPOINTING MONSOON IN INDIA, COULD RAPIDLY SHIFT THE GLOBAL BALANCE SHEET


production is expected to reach approximately 9.3 billion litres this year – about 1 billion litres more than last year – and could climb to 10.2 billion litres in 2026/27, representing roughly 27% of total ethanol production. This would require around 24 million tonnes of corn.


With Brazil forecast to produce 135– 138 million tonnes of corn in 2026 and domestic consumption near 65 million tonnes, ample supply remains available for both ethanol expansion and exports. However, cane based ethanol production in 2025/26 fell 1.8 billion litres short of the previous crop, and starting stocks were already lower. As a result, carryover inventories into March 2026 are expected to be minimal.


Looking ahead, Brazil’s 2026/27 Centre South cane crop is projected between 620 and 640 million tonnes – potentially 14 to 34 million tonnes higher year on year. Sugar output could increase by 500,000 to 2 million tonnes, depending on ATR levels and the sugar mix.


DEVELOPMENTS OUTSIDE BRAZIL In Australia and South Africa, harvests have concluded broadly in line with the previous year. Central America remains active, with the region potentially adding around 300,000 tonnes of additional sugar.


The European Union and the UK have completed their campaigns, with production reportedly down by approximately 1.4 million tonnes. The upcoming crop could decline by


another 1 to 2 million tonnes, reflecting structural and agronomic pressures.


The CIS region delivered a solid harvest comparable to last year, generating an estimated 1.3 million tonnes of surplus for export to neighbouring markets.


India’s monsoon season (June– September 2025) brought excessive rainfall, particularly in Maharashtra, tempering earlier optimism. Production for 2025/26 is now expected to reach around 29 million tonnes – up from 26 million tonnes in 2024/25 but below initial projections of 30–31 million tonnes.


New Delhi authorised exports of 1.5 million tonnes, yet less than 300,000 tonnes appear to have been sold. An additional 500,000 tonnes were later approved. With global prices unattractive, India may opt to retain inventories domestically rather than export at low margins.


Meanwhile, Thailand’s harvest is trailing last year’s pace but may extend longer. Cane production could reach 95–100 million tonnes, up from 92 million tonnes previously. The resulting 500,000 to 1 million tonnes of additional sugar will likely target export markets, although shipment pace remains slower than desired, potentially pressuring regional prices.


THE WEIGHT OF SPECULATIVE SELLING Against this fundamental backdrop, speculative positioning has amplified downward pressure. Since late December 2023, funds and speculative accounts have built


increasingly bearish positions.


According to the latest Commodity Futures Trading Commission report (20 February 2026), funds and speculators held a net short position of 266,000 lots – equivalent to roughly 13.5 million tonnes of sugar. Gross short exposure reached a record 17.7 million tonnes, while combined fund/speculative positions totalled 22.6 million tonnes. Index funds hold a net long position of 10.6 million tonnes, now smaller than the net speculative short.


This imbalance creates latent volatility. When markets trade below the cost of production while carrying record speculative shorts, periodic short covering rallies become increasingly likely.


CONCLUSION: PRESSURE TODAY, VOLATILITY TOMORROW Sugar prices are currently weighed down by modest surpluses and heavy speculative selling. Yet the market’s structural sensitivity to weather, ethanol economics, and policy intervention remains intact. Producers may be facing difficult balance sheets today, but the combination of tight stocks, biofuel linkages, and extreme positioning suggests that relief rallies – even if temporary – are likely to emerge.


In sugar, complacency rarely lasts long.


Alberto Peixoto E: albertopeixoto@apcommodities. london T: +44(0) 7570 714 981


25 | ADMISI - The Ghost In The Machine | Q1 Edition 2026


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