Introduction] El Niño, a climate phenomenon characterized by abnormally high sea surface temperatures in the equatorial Pacific, affects sugarcane growth in major producing countries to varying degrees. There is a 51% probability that it will develop into a strong El Niño by the end of 2026. Although its current impact on international sugar prices is only anticipated, historically, it could be a crucial catalyst, impacting production in major producing countries, disrupting the supply-demand balance, and providing strong support for sugar prices in the second half of 2026.
El Niño is a climate phenomenon caused by persistently high sea surface temperatures in the central and eastern equatorial Pacific, leading to abnormal atmospheric circulation. El Niño has a significant impact on global climate, often bringing more extreme weather events and meteorological disasters. In updates released by the International Meteorological Organization, the probability of El Niño occurring between March and May has increased from 10% to over 60%, with a 51% probability of developing into a strong El Niño by the end of the year. The oceanic state of the equatorial Pacific is changing rapidly.
The Impact of El Niño on Sugar Prices
In 2015-2016, a super El Niño swept the globe, directly impacting major sugarcane producing regions and driving ICE raw sugar prices from 10 cents/lb to 23.9 cents/lb, a surge of 139%. In the early stages of anticipation, ICE raw sugar prices bottomed out at 10-12 cents/lb in April-May 2015, with funds gradually increasing their net long positions. Subsequently, from June to August, drought data from India and Thailand confirmed the anticipated global supply-demand gap, initiating a strong upward trend in sugar prices. ICE raw sugar prices surged from 12 cents/lb in June to 15.24 cents/lb at the end of December, a 27% increase. Entering 2016, the impact of El Niño persisted, global inventories remained low, and sugar prices fluctuated at high levels between 20-24 cents/lb until 2017 when the effects of El Niño subsided and Indian production recovered, at which point prices gradually declined.
Entering the second quarter of 2026, news of the super El Niño event resurfaced, coupled with adjustments to the Brazilian sugar alcohol ratio, causing ICE raw sugar prices to fluctuate around 14 cents/pound, reaching a high of 15.37 cents/pound.
The Impact of El Niño on Major Global Sugar-Producing Countries
The core impact of El Niño is the disruption of global atmospheric circulation. Normally humid South Asia and Southeast Asia (India and Thailand) are prone to drought, while normally arid south-central Brazil experiences excessive rainfall. Global sugar supply is highly concentrated in Brazil, India, and Thailand, with these three countries accounting for over 60% of global production. El Niño's impact on these three countries is drastically different.
India's sugarcane growth is highly dependent on the southwest monsoon from June to September. Irrigation facilities in the main producing states of Maharashtra and Karnataka are weak, with 70%-80% of rainfall coming from the monsoon. El Niño significantly weakens the southwest monsoon, leading to drought in the south-central region and directly inhibiting sugarcane growth. The super El Niño of 2015-2016 reduced India's sugarcane planting area by 18%, and sugar production in the 2015/16 crushing season fell to 25.1 million tons, a decrease of 6 million tons compared to expectations. If another super El Niño event occurs in 2026, India's total sugar production for the 2026/27 crushing season could potentially fall below 30 million tons.
Thailand's main sugarcane producing areas are concentrated in central Thailand, relying heavily on rainfall for irrigation. The high temperatures and low rainfall caused by El Niño can lead to the death of ratooned sugarcane, stunted growth, and a decrease in sugar yield. In the 2015/16 crushing season, Thailand's sugar production decreased by approximately 1.5 million tons, and exports fell from 8 million tons in the 2014/15 season to 5.5 million tons, a decrease of 31%. While Thailand's sugar production is expected to increase year-on-year in the 2025/26 crushing season, the 2026/27 season may see a reduction due to weather conditions.
El Niño has led to excessive rainfall in south-central Brazil, creating both advantages and disadvantages for sugarcane growth. On the positive side, ample rainfall promotes sugarcane elongation and increases yield, but excessive rainfall also carries risks such as reduced sugar content, delayed crushing, and increased sugar loss. Brazil's sugar production ratio is projected to drop to 48% in the 2026/27 crushing season. High oil prices will prioritize ethanol production, indirectly reducing white sugar supply and amplifying the supply contraction effect of El Niño.
El Niño May Catalyze a Reversal of Supply and Demand Patterns
While the super El Niño of 2015 was not the sole reason for the rise in international sugar prices, it was a crucial catalyst. By impacting production in major producing countries, it directly disrupted the supply-demand balance, driving the global market from surplus to shortage. Coupled with financial intervention, this ultimately propelled sugar prices to soar. Against the backdrop of escalating global climate change, the frequency and intensity of extreme weather events such as El Niño are likely to increase in 2026. Production cuts in India and Thailand are highly certain, and Brazil's sugar-to-ethanol ratio adjustment will further contract supply, shifting the global sugar market from surplus to a tight balance. Furthermore, the prolonged stalemate in the US-Iran conflict may lead to high and volatile oil prices, providing strong support for sugar prices in the second half of 2026. ICE raw sugar prices are expected to fluctuate within the range of 15-20 cents per pound.
Source: Zhuo Chuang Information