World sugar benchmarks stabilized on Monday following a steep drop earlier in the session tied to news that the U.S. and Iran had reached an initial agreement to end their conflict and reopen the Strait of Hormuz to shipping. The development led to a notable fall in energy prices, which in turn changed incentives for cane-based production.
Lower energy costs make it relatively more profitable for cane mills to divert output toward sugar rather than ethanol made for biofuel, a shift that put downward pressure on sugar markets before some stabilization later in the day.
On the ICE exchange, raw sugar futures - widely used as a global price benchmark - tumbled to 13.61 cents per pound on the announcement, the lowest level seen since late April. By 1539 GMT the contract had recovered modestly and was trading 0.2% higher at 13.72 cents.
White sugar futures also moved lower, slipping 0.3% to $443 per metric ton.
Broker and consultant Michael McDougall observed that raw sugar could receive some initial support if the U.S.-Iran agreement holds, citing potential increases in demand from Gulf sugar refineries that had been operating below normal capacity. At the same time, McDougall noted that the same dynamics - namely the ability of Gulf refiners to resume fuller operations - are exerting downward pressure on white sugar prices because those refiners will be able to raise sweetener output if the deal continues to hold.
The market moves reflect a chain of effects described plainly by participants: an easing of geopolitical risk reduces energy prices, the change in energy costs alters the relative economics of producing ethanol versus sugar at cane mills, and refiners in the Gulf region may absorb more raw material and boost sweetener supply if their operations normalize.
Uncertainty remains linked to the durability of the agreement and how persistent the energy-price effect will be, but the immediate market response showed raw sugar reaching multi-week lows before a partial rebound and white sugar easing on the prospect of increased refining activity in the Gulf.