Indian Government authorizes sugar imports
Analyst's View | By Marcelo Di Bonifacio Filho
After rumors earlier this week, the Indian government has officially authorized a sugar import quota of 1.0 million tons, to be delivered by October 31, 2026, tariff-free. The decision is primarily based on the accelerated increase in domestic prices, which since the start of the monsoon have risen from 4,100 rupees/quintal to 6,400 rupees/quintal in Kolhapur (Maharashtra), a 56% appreciation, breaking records day after day.
Carrying stocks as of September 31, 2025, were already at historically low levels, at just 4.9 million tons, equivalent to 2 months of consumption. The 25/26 season saw an increase in sugar supply, but it fell short of market expectations. It was anticipated that (without imports) India could end September 2026 with stocks close to 4.0 MMt, and the months of October and November (still at the start of harvest) would see minimal sugar availability—at a time of important festivals and holidays in the country, which seasonally elevate internal commodity consumption.
Two months ago, StoneX clients were already reading in our reports about the possibility of India importing sugar in the short/medium term (read the Weekly Report from June 26), given the monsoon situation and stock trends at the turn of the harvest. Now, the scenario materializes and temporarily pushed prices above US¢ 18/lb, the highest since April 2025; the March/27 contract is already aiming for "19 cents."
The import authorization comes at a time when the market is highly strained due to rainfall conditions in the Northern Hemisphere. Not only is India experiencing monsoons more than 10% below average, but Thailand is also expected to see crop failures in 2026/27. Even more critically, the European Union is facing one of the worst droughts in its history, alongside elevated temperatures, which will increase the bloc's need for imports, especially in the first three quarters of next year. This is significantly bullish for refined sugar prices—and, consequently, for the LDN-NY Differential, which tends to anticipate higher physical demand for raw sugar.
Although the short term does not face any pressure on trade flow (after all, current #11 prices more than justify an increase in the sugar mix in the Center-South at least between August and October, and the general demand for imports remains weak), expectations have been guiding the market. Funds increased their net long positions on the NY exchange by more than 115,000 lots (data up to August 11), and we estimate the position as of August 18 to be between 75-85 thousand net long. The addition of substantial demand, of 1.0 MMt, with a short deadline (just over two months) puts relevant pressure on and "scares" the market, but we understand there is available supply, particularly from Brazil.
However, this product would take around two months to reach western Indian ports (originating from Brazil), which indeed further strains prices—especially because the Indian government has no intention of delaying purchases given that the #11 contract after September, with the roll to SBH7, will become even more expensive. According to our calculations, Indian sugar currently hovers around US$ 615/t (net of GST, goods and services tax), and VHP CIF (originating in Santos) would arrive between US$ 430-450/t, net of GST.
In my view, the market is under selling pressure from Center-South mills in the very short term, something already evident in today's (20th) price behavior, which touched US¢ 18/lb right at the announcement of the Indian quota and quickly dropped to the range of US¢ 17.60-17.70/lb. Longer contracts, from May/27 onward, are operating almost stable or falling, indicating that recent highs have been moments for mills to secure more attractive margins for the current and upcoming harvests.
On the other hand, during periods of high speculative presence in the market, fundamentals become clouded. Funds tend to have large financial volumes and active participation in volatility movements, which could indeed generate new highs in the coming days. The #11 rally still has unresolved issues, such as the definition of crop sizes in Thailand and the European Union, as well as the Center-South harvest itself. If rains in the region return to above-average levels from September to November (the tail end of the 26/27 harvest), mills will struggle to harvest all available sugarcane and face difficulties in the crystallization process of the cane juice.
Finally, an important reflection looms regarding the outlook for October/26 and March/27 contracts. CFTC data shows that as of August 11, there was a robust increase in commercial agents' selling positions, which was certainly expanded in the following week. Therefore, if fund-driven buying pressure becomes even stronger in the coming days and months, who will be the selling counterpart in these first two screens?
