A severe El Niño disturbance, combined with policy shifts in major producing countries such as India, Brazil, and Thailand, has altered the global sugar supply-demand landscape.
International sugar prices surged higher, driving Zhengzhou sugar futures to gap open higher after the National Day holiday.
This article reviews sugarcane crushing progress across major producing nations, breaks down the linkage logic between domestic and overseas markets, and offers corresponding options trading ideas based on market characteristics, aiming to provide reference for market participants.
The National Oceanic and Atmospheric Administration (NOAA) issued an El Niño warning for autumn and winter in June, raised the probability of a strong El Niño in July, and upgraded the intensity forecast in September.
India and Thailand face drought risks during the critical sugarcane growth period, which will directly affect yields and sugar content.
In India, sugarcane diseases and heavy rainfall led to output falling short of expectations, pushing domestic sugar prices higher, prompting policy measures including a cap of 400 tons on dealer inventories and approval of a 1-million-ton duty-free raw sugar import quota.
Additionally, Brazil's sugarcane allocation to sugar production declined, and heavy rains in the center-south region delayed harvesting, affecting the 2026/2027 crushing season.
International sugar prices began their rally in late July, surged sharply in August, and the ICE No. 11 sugar front-month contract closing price briefly exceeded 19.70 cents per pound in September.
Driven by overseas markets, the Zhengzhou sugar front-month contract halted its decline and rebounded, breaking above 5,500 yuan per ton.
During the National Day holiday, sugarcane crushing progress in Brazil's center-south region was slow, with sugar output falling short of expectations, pushing the ICE No. 11 sugar front-month contract toward 21 cents per pound.
On the first trading day after the National Day holiday, the Zhengzhou sugar 2701 contract gapped open higher.
Market Conditions
Reports from the International Sugar Organization (ISO) show a global sugar surplus of 1.1 million tons for the 2025/2026 season, with a projected global shortage of 200,000 tons for the 2026/2027 season.
Currently, Brazil has entered the late stage of its 2026/2027 crushing season.
Sugar mills in Brazil's center-south producing region will gradually wrap up crushing, and new sugar supply will gradually contract, but recent heavy rains have hindered sugarcane harvesting progress in the region.
The total crushing volume in Brazil's northeast producing region remains at a relatively high level for the year.
India's crushing has just begun, currently in the stage of sugarcane maturation and small-scale trial crushing by mills, with large-scale sugar market arrivals not expected until November.
Thailand's large-scale sugarcane harvest will also begin in November, when mills will gradually start crushing.
China has also not yet begun concentrated crushing, with current supply relying mainly on inventories and imports.
On the Brazil front, according to the second crop estimate report for the 2026/2027 season released by the National Supply Company (CONAB) under Brazil's Ministry of Agriculture, sugarcane was boosted by favorable weather early in the season.
As of August 20, the estimated harvested area was 9.0524 million hectares, up 1.1% year-on-year; the average yield was 77.905 tons per hectare, up 3.6% year-on-year; and production was 705 million tons, slightly revised down from the first estimate of 710 million tons but up 4.7% year-on-year, the second-highest level since the 2005/2006 season.
Despite the bumper sugarcane crop, Brazil temporarily raised the gasoline-ethanol blending ratio from 30% to 32%, boosting ethanol demand and channeling more sugarcane toward ethanol production, reducing the sugar allocation ratio.
Meanwhile, Brazil's sugar production for the 2026/2027 season is estimated at 42.9 million tons, down 2.9% year-on-year.
Of this, center-south production is 39.5 million tons, down 3.1% year-on-year.
The crushing report from the Brazilian Sugarcane Industry Association (UNICA) shows that as of August 1, cumulative sugarcane crushed in Brazil's center-south region for the 2026/2027 season reached 312 million tons, up 2.38% year-on-year; the average ATR (total recoverable sugar per ton of sugarcane) was 127.91 kg per ton, up 0.81% year-on-year; the sugar allocation ratio at mills was only 44.71%, below the 52.09% in the same period of the 2025/2026 season; sugar yield per ton of sugarcane was 54.50 kg, down 13.45% year-on-year; and cumulative sugar production in the center-south reached 16.991 million tons, down 12.11% year-on-year.
According to data from the Secretariat of Foreign Trade (SECEX) under Brazil's Ministry of Economy, as of the end of August, Brazil's cumulative sugar exports for the 2026/2027 season totaled 11.9201 million tons, down 17.45% year-on-year.
Of this, exports to China were 1.5199 million tons, down 43.83% year-on-year.
On the India front, according to the Press Information Bureau (PIB), due to red rot disease, shoot borer pest damage, and excessive rainfall, India's sugar production for the 2026/2027 season may fall below the initial estimate of 30.6 million tons.
Under normal conditions, India's sugar production ranges from 32 million to 34 million tons, with domestic consumption at 28 million to 29 million tons.
The Indian government has advised sugar mills in various states to begin crushing production on October 15, hoping to boost October sugar output from the usual 300,000 to 400,000 tons to over 1 million tons.
However, achieving this target faces challenges such as insufficient sugar content accumulation in sugarcane leading to low sugar recovery rates.
The U.S. Department of Agriculture (USDA) estimates India's sugar production for the 2026/2027 season at 29.5 million tons, a relatively low level in recent seasons.
India's sugar export ban expired on September 30, with no extension notice issued yet, but the market still expects India's exports to tighten in the future.
According to The Times of India, the Indian government plans to ban the use of sugarcane juice and B-heavy molasses for ethanol production starting in November.
If implemented, this measure would limit the diversion of sugarcane raw materials to ethanol, favoring priority allocation to sugar production and expanding sugar supply, but in the short term it could also prompt mills to accelerate sugarcane-to-ethanol production before the measure is officially announced.
Currently, market concerns are driving sugar prices higher, and if the measure is not implemented later, related gains may be given back.
On the Thailand front, according to a report from the Foreign Agricultural Service under the USDA, Thailand's sugarcane production for the 2026/2027 season is expected to decline 8%, with sugar production expected to fall 16%.
According to data from the Thai Sugar Millers Association, Thailand's sugar production for the 2026/2027 season may be less than 10 million tons, down 16.67% from the 2025/2026 season.
Overall, a strong El Niño and policy measures in major producing countries have triggered market concerns about global sugar supply, thereby pushing sugar prices higher.
Domestically, according to data from the China Sugar Association, China's sugar production for the 2025/2026 season was 12.95 million tons, an increase of 16.01%.
Of this, cane sugar was 11.38 million tons and beet sugar was 1.57 million tons.
As of the end of August, industrial sugar inventories for the 2025/2026 season stood at 2.22 million tons, up 1.06 million tons year-on-year; cumulative sugar sales reached 10.73 million tons, with a sales rate of 82.88%.
Data from the National Bureau of Statistics shows that from October 2025 to August 2026, China's refined sugar production was 11.58 million tons, with August monthly production at 295,000 tons.
According to the China Agricultural Supply and Demand Estimates (CASDE) released by the Ministry of Agriculture and Rural Affairs, China's sugar crop planting area for the 2026/2027 season is 1,461 thousand hectares, with sugar crop yield at 60.92 tons per hectare and sugar production at 12.93 million tons, a slight decline from the 2025/2026 season.
Of this, cane sugar production is 11.43 million tons and beet sugar production is 1.50 million tons.
According to data from the General Administration of Customs, China imported 650,000 tons of sugar in August, down 180,000 tons year-on-year; from October 2025 to August 2026, cumulative sugar imports were 4.03 million tons, roughly flat year-on-year.
Imports for the 2025/2026 season were high early and low later: cumulative imports from October 2025 to April 2026 were 2.42 million tons, up 680,000 tons from the same period of the previous season, releasing import volume early; cumulative imports from May to August 2026 were 1.61 million tons, down 730,000 tons from the same period of the previous season, with import intensity during the traditional peak season significantly weaker than the previous season.
Data from the China Sugar Association shows that domestic industrial sugar inventories were high during the 2025/2026 season, with monthly data exceeding the same period in previous years, peaking at 6.7 million tons in March, up 41% year-on-year, and the overall destocking process was slow, with inventories still at 2.22 million tons in August.
Data from the China Sugar Association also shows that demand was weak from October 2025 to February 2026, with domestic sugar consumption totaling 3.45 million tons, down 1.30 million tons year-on-year; demand stabilized and rebounded from March to August 2026, with domestic sugar consumption totaling 7.28 million tons, up 2.03 million tons year-on-year.
From October 2025 to August 2026, China's total sugar consumption was 10.73 million tons, up 730,000 tons from the same period of the previous season.
Overall, despite weak consumption at the start of the period, total domestic sugar consumption is expected to increase, supported by demand from the beverage and cold drink industries in spring and summer.
According to CASDE estimates, China's sugar consumption for the 2025/2026 season is 15.70 million tons, and for the 2026/2027 season is 15.73 million tons.
Market Outlook
El Niño has affected sugarcane planting and harvesting in Brazil, Thailand, India, and other countries, triggering global concerns about sugar supply and driving international sugar prices higher.
For the domestic market, this gap-up opening is undoubtedly driven by the sharp rise in overseas markets during the National Day holiday.
On fundamentals, domestic sugar production increased significantly in the 2025/2026 season, with ample domestic sugar supply; bonded sugar inventories at ports were relatively high in early 2026, and even as international raw sugar prices rose and import profits narrowed, suppressing out-of-quota import arrivals, overall import volumes remained relatively stable.
In the 2026/2027 season, good planting returns have boosted farmers' enthusiasm for planting, and producing regions such as Guangxi are promoting technology to improve yields; even if sugarcane sugar content declines due to weather, China's total sugar production is expected to remain at a high level.
Global sugar supply is expected to tighten due to a strong El Niño and policy measures in major producing countries, and China's importable volume will correspondingly decrease.
On the downstream side, demand from the food industry's beverage segment remains decent, while traditional sugar consumption in candy and pastry segments lacks growth momentum.
In the long term, the relatively high carryover inventories from the 2025/2026 season and the bumper production expectations for the 2026/2027 season have reduced the market's dependence on imported sugar.
The summer consumption peak from August to September and the "double holiday" stocking period have passed, and the market has now entered the traditional off-season.
However, large-scale crushing by sugar mills has not yet begun, and the overall market is in a transitional phase.
New sugar will gradually come onto the market in November, when supply will gradually increase.
In the short term, the domestic sugar market needs to digest the weather theme, and sugar prices are expected to pull back amid consolidation.
Against the backdrop of contracting global sugar supply, the probability of a sharp price decline is low.
However, during this period, unexpected news could also push prices higher.
Options Strategy
For this type of market, it is suggested to buy N lots of put options with a higher strike price while simultaneously selling M lots of put options with a lower strike price (M>N), collecting a small amount of net premium.
The core logic of this strategy is to profit from a modest price decline (maximum profit is achieved when the underlying contract price falls to the lower strike price level), and if prices do not pull back but continue to rise, the net premium collected at the outset can be retained.
It should be noted that initially, if the underlying contract price declines modestly, the strategy may incur losses; refer to the strategy combination profit-and-loss diagram for details.
It should also be noted that if weather impacts subsequently weaken and policy measures in major producing countries boost sugar production and exports, the underlying contract price may fall rapidly.
At that point, implied volatility of options will rise quickly, and the strategy combination will face severe losses and margin call pressure.
Therefore, appropriate stop-loss levels need to be set in advance for this strategy combination.
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