Australian Sugar Rebound Meets Global Price and Cost Squeeze

Australian raw sugar is set for a solid production rebound in 2026/27, but low global prices, sharply higher energy and fertilizer costs, and a stronger Australian dollar are compressing margins and limiting upside for new investment.

After weather‑driven shortfalls, Australia’s cane sector is heading into 2026/27 with a fuller growing season, better cane yields and high carryover stocks. Yet global raw sugar futures have eased over the past month and remain historically low in real terms, while diesel and nitrogen costs have roughly doubled and port storage is nearing capacity. For European buyers, this combination points to ample near‑term availability, but also rising medium‑term risk if El Niño develops and growers respond to squeezed returns.

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📈 Prices & Market Tone

Global benchmark ICE No.11 raw sugar futures have softened in recent weeks, with nearby contracts slipping back toward the mid‑teen US cents per pound range as expectations of ample supply weigh on sentiment. Over the past month, assessments show prices drifting from around 14.4 to just under 14.0 US cents per pound, while recent trading sessions have seen additional downside and elevated volumes, underscoring a bearish short‑term tone.         👉  👉  👉    👉  👉👉👉

In physical markets, recent European FCA granulated sugar offers are broadly stable to slightly firmer, trading mostly between about 0.44 and 0.57 EUR/kg depending on origin and specification. German origin is at the top of this range (around 0.57 EUR/kg), while Ukrainian and Lithuanian origins sit closer to 0.43–0.44 EUR/kg, indicating comfortable regional supply and modest competitive pressure from Eastern Europe.

Product	Origin	Location	Delivery	Latest Price (EUR/kg)
Sugar granulated ICUMSA 45	DE	Berlin	FCA	0.57
Sugar granulated ICUMSA 45	CZ	Vyškov	FCA	0.47
Sugar granulated ICUMSA 45	UA	CZ / UA	FCA	0.44
Sugar granulated ICUMSA 32/45	GB	Norfolk	FCA	0.46

🌍 Supply & Demand: Australia in Focus

Australia’s raw sugar production in marketing year (MY) 2026/27 is forecast at 4.18 million metric tons, up 9% from an estimated 3.83 million tons in 2025/26. Sugarcane output is projected to reach 30.7 million tons, 8% higher year on year, as growers benefit from a full growing season, improved cane yields, and a modest expansion in harvested area. Even so, cane volumes remain about 1.9% below the 10‑year average, showing that the recovery is significant but not extreme.

The 2025/26 shortfall was largely a timing issue: the 2024/25 harvest in central Queensland ran into mid‑January due to unseasonal rainfall, more than a month beyond the usual early‑December finish. This delayed the regrowth cycle for the following crop and left roughly 2.7% of cane unharvested as stand‑over, which typically carries lower sugar content. By contrast, the 2025/26 harvest finished by mid‑December, enabling a full growing period for 2026/27 and underpinning the rebound.

Favourable rainfall from July 2025 to March 2026 across most Queensland cane areas has further supported the recovery. Timely fertilizer applications, weed and pest control, and strong biomass accumulation are expected to lift commercial cane sugar (CCS) levels in 2026/27 compared with the previous season. This should translate into higher sugar output per hectare, reinforcing Australia’s role as a reliable supplier to Asia just as global prices remain under pressure from comfortable inventories elsewhere.

📊 Costs, Currency & Margins

Despite better yields, growers are facing a sharp squeeze on margins. Developments in the Middle East from late February 2026 disrupted global energy and fertilizer markets, pushing diesel prices to roughly double previous levels and more than doubling nitrogenous fertilizer prices. For the 2026/27 Australian crop, most fertilizer had already been applied before these spikes, limiting any direct yield impact for this season but locking in much higher cost structures for field operations and future plantings.

The immediate hit is on harvesting and transport costs: elevated diesel prices will raise in‑season expenses, eroding profitability at the mill‑gate even if output rises. Looking ahead to MY 2027/28, if energy and fertilizer costs remain elevated, growers may cut back on inputs or marginal area, especially given that ICE No.11 futures for 2027 are only signaling a modest recovery to around 16 US cents per pound. These forward prices are insufficient to fully compensate for doubled input costs, limiting incentives for aggressive expansion.

Currency moves are adding to the pressure. The Australian dollar appreciated by about 6% between mid‑January and mid‑February 2026, reaching its strongest level since early 2023 as the Reserve Bank of Australia tightened policy while other major central banks eased. A stronger AUD directly reduces the local‑currency returns from USD‑denominated sugar exports, further compressing grower margins and leaving the sector heavily reliant on efficiency gains and cost control rather than volume growth.

🚢 Trade Flows & Logistics

Australian raw sugar exports are forecast to jump 33% to 3.6 million metric tons in 2026/27, up from about 2.7 million tons in 2025/26. This increase exceeds the gain in production and reflects sizeable carryover stocks that built up when low global prices around 15 US cents per pound in 2025/26 slowed buying and delayed shipments. Importers had little urgency to book volumes aggressively, extending the time sugar spent in port storage and warehouse facilities.

Storage capacity at Queensland’s six dedicated sugar export terminals is now a critical constraint. Operators must accelerate exports in the months ahead to clear space before the new crop flows to port from July. Japan, Indonesia and South Korea are expected to remain the dominant buyers, together taking 85–95% of Australia’s raw sugar exports. Meanwhile, port operations are set for transition as Sugar Terminal Limited completes its take‑over of full management from Queensland Sugar Limited during 2026, a change that may temporarily affect logistics but is unlikely to alter trade direction.

For European buyers and traders, the strong Asian orientation of Australian exports means direct competition for physical cargoes is limited under normal conditions. However, any disruption in this export program—whether from port bottlenecks, weather‑related delays or future El Niño‑induced crop issues—could quickly tighten the global raw sugar balance. In that scenario, benchmark ICE No.11 prices, which underpin many physical contracts, could respond disproportionately given today’s relatively low nominal levels.

🌦️ Weather & Risk Outlook

The near‑term weather outlook for Queensland’s cane belt is reasonably constructive for harvest. Australia’s Bureau of Meteorology indicates an increased probability of below‑median rainfall across large areas of Queensland during May to July 2026, conditions that are generally supportive for field access and harvest efficiency once cutting begins in late May and ramps up through July.    👉  👉  👉

The bigger weather risk lies further out. International forecasters and the Bureau of Meteorology have flagged a rising probability of El Niño conditions forming later in 2026, which would typically bring reduced wet‑season rainfall to key cane regions. That would threaten soil moisture recharge and plant growth for the 2027/28 crop, just as growers are already contending with high input costs and an unhelpful currency backdrop. Market participants should therefore monitor both ENSO developments and Australian planting decisions closely in the second half of 2026.

📆 Trading & Procurement Outlook

• Producers / Mills (Australia): Consider forward hedging a portion of 2026/27 output at current ICE No.11 levels while watching diesel and fertilizer markets; margin protection rather than outright price speculation should be the priority.
• Industrial buyers (Europe & Asia): Use the current combination of soft futures prices and ample Australian export availability to extend coverage modestly into 2027, but avoid over‑coverage given the rising El Niño risk and currency uncertainty.
• Traders: Watch for basis opportunities around Queensland ports as storage tightness forces export flows; short‑term discounts could emerge around harvest start if logistics lag stock drawdown.

📉 3‑Day Directional View (indicative)

• ICE No.11 (raw sugar): Bias mildly downward to sideways over the next three trading sessions as ample supply expectations and a firm USD continue to cap rallies.
• EU physical (granulated, FCA): Prices likely to remain broadly stable in the 0.44–0.57 EUR/kg range, with slight downside risk for higher‑priced origins if futures soften further.
• Australian export parity (raw): Local returns pressured by strong AUD and high diesel costs; little incentive for aggressive price undercutting despite global softness.

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