FX.co ★ Sugar Futures Near 2-Month Highs

US sugar futures traded above 15 cents per pound, the highest level since mid-May, supported in part by rising oil prices. Higher energy costs make ethanol production more attractive, prompting mills to divert more cane from sugar to biofuel and potentially tightening sugar supply.

At the same time, concerns over global availability persisted as a strengthening El Niño threatened crop yields in key producing regions across Asia and the Americas. In India, weaker monsoon rains have raised the risk of lower sugar output and a smaller sugarcane harvest, with inadequate rainfall potentially affecting both the current crop and the development of next season’s cane.

The market also continued to track conditions in top producer Brazil, where recent rains have disrupted harvesting in major growing areas. The latest data show that sugar production in Brazil’s Center-South region fell about 3% year on year to 2.31 million tons in the first half of June, underscoring the ongoing shift toward higher biofuel output.