Sugar Surges While Cocoa and Coffee Stay Below Last Year: What the FAO Index Says About Margins
Sugar is up about 21% over twelve months while coffee is down 26% and cocoa 9%. Food and beverage margins will turn on recipe, because sugar is a cost headwind and the other two remain tailwinds even after Friday's jump.
Sugar is up about 21% over twelve months, coffee is down about 26% and cocoa is down about 9%. Only sugar buyers face much cost pressure, driven by weather rather than port disruption.
In Friday trading, before the settlement that put the gain slightly higher, the March 2027 sugar No. 11 contract on ICE was at 19.91 cents a pound, up 5.12% on the day, according to the exchange's delayed quotes. The contract is up roughly 21% over a year and 10% over the past month, and it sits near its highest since last April. The curve behind it falls to 19.16 cents for May, 18.70 for July and 18.60 for October 2027, with a bump to 18.84 for March 2028 and 17.69 by March 2029: the market is paying for tightness now and pricing relief later.
The cause is weather. The FAO sugar index rose 6.1% in September on tighter 2026/27 supply expectations, and the FAO's own account lists the reasons: lower Thai output, below-normal Indian rainfall with El Niño strengthening, heavy rain in Brazil's Centre-South and a smaller EU beet area. StoneX projects a global sugar deficit of 900,000 tonnes in 2026/27, down from the 1.7 million tonnes it saw in late September, so the tightness is real and smaller than the rally implies.
The shipping disruption sits elsewhere. FAO's overall index averaged 136.0 points in September, up 1.5% from August and 5.8% from a year earlier, but grains account for the strongest pressure. Cereals rose 5.1% on the month and 17.2% on the year, with wheat up 6.3% on Black Sea logistics and dry weather and maize up 5.6%. Chief economist Maximo Torero said that "disruptions in the Strait of Hormuz and the Black Sea combine with climate shocks," and that "if sustained, these pressures will soon pass through to consumer food prices." That is a warning about bread, noodles and animal feed, where the grain sits closest to the shelf price. The index does not include coffee or cocoa.
Cocoa is the clearest case against a broad rally. December cocoa on ICE was at $5,609 a tonne on Friday, up 4.24%, and March at $5,720, up 4.99%. Those are sharp one-day moves. They are also a bounce from the week's low near $5,100, the weakest level since July 27, and the contract is still about 9% below where it stood a year ago and about 9% below a month ago. A chocolate maker buying today pays less than it did a year ago.
What lifted it was a supply forecast. Reuters reported, citing sources, that Ivory Coast's 2026/27 main-crop cocoa harvest is seen around 17% lower, which covers the main crop and not the year's whole output. The forecast comes while there is a glut. ICE cocoa stocks stood at 3.48 million bags on September 30, a 2.25-year high, and Ivory Coast shipments reached 2.18 million tonnes in the marketing year to September 27, up 19.8%.
A cut of that size lands on full warehouses and heavy port arrivals. It narrows a surplus before it can create a shortage, and the price action, a pop off the lowest level since July rather than a break to new highs, reads that way.
Coffee is the quietest of the three. December coffee C traded at 290.75 cents a pound on Friday, up 0.87%, with March at 282.55, July at 277.85 and December 2027 at 273.15. That curve falls as it extends, with December 2027 about 6% below December 2026, the same shape as sugar's, but the level matters more: the market is about 26% below its price a year ago. Arabica touched roughly $2.95 a pound earlier in the week, its highest since early September, on worries about the quality of the Brazilian harvest.
Together, the three commodities show a smaller move than the headline suggests. Coffee is down about a quarter on the year and cocoa about a tenth, while sugar is up about a fifth. An index of the three would be roughly flat to lower, but buyers purchase ingredients for their recipes rather than an index. The recipe determines the cost pressure: a bakery pays for sugar and flour, a chocolate maker for cocoa and sugar, a roaster for coffee alone, and only the first and last of those sit at opposite ends of this week's prices.
Friday's jumps, sugar up 5% and cocoa up 4% in a day, could mark the start of a turn, and a strengthening El Niño could push all three higher. That is possible, although sugar already prices that tightness, as its curve shows, and the cocoa and coffee jumps start from levels that are low relative to last year. For cocoa to break out, the main-crop shortfall has to outrun the stock build, and that takes months of arrivals data, not a morning.
The cost implications therefore differ by business. A bakery or beverage business whose largest soft input is sugar has a cost problem this winter, and the FAO's grain figures add to it where flour is also a major input. A chocolate or coffee business is buying below last year's prices even after Friday, and its position improves if the cocoa glut works through.
FAO's next index, due in early November, will probably show the sugar sub-index rising again, the cereal index rising again and the overall figure still under 140. Consumer staples with cocoa exposure should show their cost relief in their next results, while sugar-heavy bakers and beverage makers carry the pressure into the new year.