Sugar prices on Tuesday settled moderately higher on strength in crude oil prices along with strength in the Brazilian real against the dollar. Crude oil rose Tuesday and is just below Monday's 2-1/2 year high. Higher crude prices are positive for ethanol prices and may prompt Brazil's sugar mills to divert more cane-crushing toward ethanol production rather than sugar production, thus reducing sugar supplies. Also, the Brazilian real (^USDBRL) moved higher Tuesday and is just below Monday's 5-3/4 month high, which discourages export selling by Brazil's sugar producers.
Sugar prices have support on last Friday's projections by the International Sugar Organization (ISO) for the global 2021/22 sugar market to show a deficit of -2.7 MMT, a slight improvement from the -3.1 MMT global sugar deficit seen for 2020/21.
Drought concerns in Brazil are a major bullish factor for sugar prices. The National Weather System (NWS) on May 28 issued a water emergency alert for central Brazil. The NWS said the rainfall deficit in Brazil is "severe" and that the future weather outlook shows most of Brazil's central region will receive little rain from June to August.