Sugar Cane Market: Fuel Costs Rise While Cane Supply Faces New Constraints

Stronger energy markets and policy-driven export restrictions are tightening the cost and supply backdrop for sugar cane, supporting a moderately bullish short-term price bias in EUR terms. The sugar chain enters early Q3 2026 with a notable rebound in fuel costs and mixed supply signals. ICE low‑sulphur gas oil futures have rallied by roughly 2–3% in the front 2026 contracts on 6 July, keeping diesel values elevated along the forward curve through 2030 and raising cane production and logistics costs. At the same time, Brazil’s 2026/27 Center‑South cane area has expanded, but recent data point to weaker crush and sugar output, while India’s ongoing export ban and tight release quotas continue to remove a key supplier from the global export balance. Together these factors underpin refined sugar prices in EUR, even as futures remain below last year’s peaks.

Prices

ICE low‑sulphur gas oil (a key diesel benchmark for farm and transport costs) shows a steep but gradually flattening contango. The Jul‑26 contract settled at about USD 971/t on 6 July, up 2.8% on the day, with values declining along the curve towards roughly USD 681–690/t by late 2030 and early 2031. This confirms a structurally higher fuel cost base for cane growers and millers over the next seasons compared with pre‑2022 levels.

Refined Brazilian ICUMSA 45 sugar FOB São Paulo has recently traded around EUR 0.53/kg, slightly above mid‑October levels near EUR 0.51–0.52/kg after converting from USD, indicating a mild upward drift but not a price spike. ICE No.11 raw sugar futures remain in a mid‑range: late‑June closes around 13.8–14.0 US‑ct/lb (≈EUR 305–315/t) suggest the market has corrected from earlier highs but is still supported by supply concerns. 

Supply & Demand

Brazil remains the pivotal cane supplier. Official monitoring for the 2026/27 season shows Center‑South harvestable cane area up about 3% year on year to just over 9.1 million hectares, providing production capacity growth. However, mid‑June data from Brazil’s agriculture ministry and industry reports indicate that cane crush in the Center‑South recently fell by around 13% year on year, with sugar output in the same period slipping to roughly 2.2 million tonnes, underscoring weather and operational constraints. 

In India, the export picture is more clearly restrictive. The government has maintained a de facto ban on most sugar exports, confirmed by recent policy briefs and market commentary, while adjusting monthly domestic release quotas to stabilize internal prices.  This removes a significant volume from the world market at a time when weather risks linked to lingering El Niño/La Niña transitions still hang over Asian cane yields. Demand growth for refined sugar remains modest but steady, with industrial use in beverages and processed foods leading consumption.

Weather & Energy Link

Recent Brazilian weather has been mixed: Center‑South regions have seen pockets of excessive rain that temporarily slowed field operations, contributing to the weaker crush figures, while forecasts for the coming weeks indicate more seasonally normal, drier conditions that should allow harvest recovery. In India and parts of Thailand, monsoon performance remains a key swing factor for cane yields in late 2026; early season forecasts point to near‑normal rainfall but with elevated volatility.

The firm energy backdrop is equally important. The upwardly sloped diesel curve out to 2030–2032 implies persistently higher harvesting, irrigation and transport costs for cane and sugar. This cost‑push element, combined with potential competition from ethanol when crude oil prices are strong, tends to set a higher floor for cane and sugar prices in EUR, even if global surpluses emerge in a single season.

Fundamentals & Policy Drivers

• Higher production costs: The ICE gas oil forward curve shows only a gradual easing of prices from almost USD 1,000/t in mid‑2026 to around USD 680–700/t by 2030–31, locking in structurally higher diesel costs for mechanized cane harvesting and road/port logistics.
• Brazil cane balance: Expanded area supports medium‑term supply, but the recent 13% drop in crush and a decline in sugar output highlight vulnerability to adverse weather and operational bottlenecks. 
• India export ban: India’s export prohibition and tight monthly release quotas shift more demand to Brazil and other exporters, underpinning the white sugar market despite only moderate global demand growth. 
• Ethanol competition: In both Brazil and India, policy‑driven ethanol mandates continue to compete for cane and molasses, creating an upside risk for sugar prices if energy markets strengthen further.

Short-Term Outlook & Trading Ideas

In the coming weeks, the combination of elevated diesel prices, constrained Indian exports and weather‑affected Brazilian crush suggests a mildly bullish to sideways bias for sugar cane and refined sugar values in EUR. Any confirmation of improved Brazilian field conditions and stronger crush could cap further gains, but downside seems limited while India remains effectively absent from export markets.

• End-users (food & beverage, refineries): Consider extending physical sugar coverage modestly into late 2026–early 2027 while EUR prices remain only moderately above 2024 levels, especially where diesel surcharges in freight contracts are rising.
• Producers (mills, growers): Use current ICE white and raw sugar futures levels to lock margins where diesel, fertilizer and labour costs are already hedged; the steep fuel curve argues for securing forward selling prices rather than waiting for a major rally.
• Traders: Focus on spreads between Brazilian FOB refined sugar and ICE futures; with white sugar futures relatively flat along the curve and diesel in contango, nearby physical premiums could remain firm when logistics tighten.

3-Day Directional View (EUR Basis)

• ICE No.11 raw sugar (converted to EUR): Slightly firmer to sideways, supported by India’s policy stance and Brazilian crush data.
• ICE No.5 white sugar: Mild upside bias near current EUR-equivalent levels, with upside capped by expectations of better Brazilian weather.
• Brazil FOB refined sugar (São Paulo): Stable to slightly higher in EUR/t as stronger diesel and freight costs filter into export offers.