Quick Summary: Sugar Market Movements and Influences
- Global sugar futures experienced a downturn as the Brazilian real weakened, incentivizing Brazilian sugar exports.
- Increased sugar production in India and favorable output forecasts for Brazil are contributing to bearish market sentiment.
- Concerns over tightening global supplies briefly supported prices, but a shift towards surplus forecasts is now dominant.
- Ethanol policy changes in India and export quotas present potential, albeit complex, bullish factors.
- Key international bodies project a shift from deficit to surplus in the global sugar balance for the upcoming season.
- Recent lows in both New York and London sugar contracts reflect the impact of robust production outlooks.
Global Sugar Prices Face Downward Pressure
March contracts for New York’s world sugar #11 (SBH26) saw a decline of -0.12, settling at $0.81 less. Similarly, March London ICE white sugar #5 (SWH26) dropped by -1.20, representing a -0.28% decrease. These movements indicate a broader downward trend in sugar prices on the day.
The primary driver for this decline is linked to recent currency fluctuations. The Brazilian real depreciated significantly against the U.S. dollar, reaching a seven-week low. This weakening real makes Brazilian sugar more attractive to international buyers, encouraging increased export sales from local producers and adding supply pressure to the global market.
Sugar prices had already been on the defensive, having recently fallen to two-week lows. This prior dip was largely attributed to a surge in sugar production from India. The India Sugar Mill Association (ISMA) reported a substantial year-over-year increase of 43% in sugar production for the October-November period, reaching 4.11 million metric tons (MMT). The number of active sugar mills crushing cane also saw a significant rise.
💡 The interplay between currency valuation and commodity exports is crucial. A weaker currency benefits commodity-exporting nations by making their goods cheaper for foreign purchasers, potentially boosting trade volumes but also impacting global price dynamics.
Outlook for Record Output in Key Producing Nations
Adding to the bearish sentiment is the outlook for record sugar output in Brazil. Conab, Brazil’s national crop agency, revised its 2025/26 sugar production estimate upward to 45 MMT from a previous 44.5 MMT. Data from Unica further supports this, showing an 8.7% year-over-year increase in Center-South sugar output during the first half of November, with cumulative production for the season also rising.
This robust production forecast from Brazil, a global sugar powerhouse, is a significant bearish factor for prices. It suggests a considerable increase in global sugar supply availability, which typically exerts downward pressure on prices, especially when combined with strong output from other major producers.
Shifting Global Supply Perspectives
The market narrative has recently swung from concerns about tight global supplies to expectations of a surplus. Just last week, prices had rallied to six-week highs on fears of supply shortages. This rally was partly fueled by StoneX’s revised estimate, which lowered Brazil’s 2026/27 Center-South sugar production forecast.
However, the overall trend is now pointing towards increased availability. The International Sugar Organization (ISO) has forecast a significant sugar surplus of 1.625 million MT for the 2025-26 season, a stark contrast to its earlier prediction of a deficit. This shift is attributed to increased production in regions like India, Thailand, and Pakistan.
📊 Understanding production forecasts from major agricultural bodies like ISO and USDA is vital for anticipating market trends. These organizations analyze vast amounts of data to project global supply and demand, significantly influencing commodity prices.
Factors Influencing Sugar Production and Exports
Recent policy considerations in India could potentially divert sugarcane away from sugar production towards ethanol. If India’s government boosts the price of ethanol used for gasoline blending, mills might prioritize crushing cane for ethanol, thereby reducing the volume available for sugar and potentially tightening domestic supplies.
On the other hand, India’s decision to allow 1.5 MMT of sugar exports for the 2025/26 season, which is less than some prior estimates, offers some support. This follows an earlier quota system implemented due to production shortfalls. The volume of allowed exports can significantly impact global supply balances.
International Sugar Organization’s Surplus Forecast
The ISO’s updated forecast paints a picture of a substantial global sugar surplus for the 2025-26 season, projected at 1.625 million MT. This follows a deficit of 2.916 million MT in the 2024-25 season. The primary drivers behind this projected surplus are anticipated production increases in India, Thailand, and Pakistan.
This revised forecast by the ISO, which previously anticipated a deficit for the 2025-26 marketing year, highlights the dynamic nature of agricultural supply projections. The ISO also forecasts a global sugar production increase of 3.2% year-over-year to 181.8 million MT in 2025-26.
📌 The shift from a projected deficit to a surplus by the ISO underscores the importance of monitoring production data from multiple key countries simultaneously. Even minor upward revisions in production from several nations can collectively alter the global supply outlook.
Impact of Increased Production on Sugar Prices
The outlook for robust global sugar supplies has significantly pressured sugar prices since early October. Both New York and London sugar contracts have recently hit multi-year lows. For example, London sugar reached a nearest-futures low not seen in 4.75 years, while New York sugar prices slumped to a 5-year low in early November.
These price movements are directly linked to higher sugar output in Brazil and the increasing expectation of a global sugar surplus. Sugar trader Czarnikow has also raised its global 2025/26 sugar surplus estimate, indicating a widespread consensus on increased supply availability.
India’s Growing Sugar Production and Export Potential
Signs of a larger Indian sugar crop are further weighing on prices. The ISMA raised its 2025/26 India sugar production estimate to 31 MMT, an increase of 18.8% year-over-year. Concurrently, their estimate for sugar used in ethanol production was reduced, potentially freeing up more sugar for export.
Excellent monsoon rains in India have contributed to favorable crop conditions, suggesting a potentially bumper harvest. This increase in both production and potential export capacity from India, the world’s second-largest producer, adds considerable bearish pressure to the global sugar market.
⚡ The strength and timing of monsoon rains are critical factors for India’s agricultural output, particularly for sugarcane. An effective monsoon can lead to significantly higher yields and production, impacting both domestic availability and export potential.
Thailand’s Expected Production Increase
The outlook for higher sugar production in Thailand also contributes to the bearish sentiment for sugar prices. The Thai Sugar Millers Corp projects a 5% year-over-year increase in the country’s 2025/26 sugar crop, reaching 10.5 MMT. This follows a 14% production rise in the previous season.
As the world’s third-largest sugar producer and second-largest exporter, Thailand’s production trends have a notable impact on global supply dynamics. An increase in output from Thailand reinforces the broader trend of rising sugar availability worldwide.
USDA Forecasts Record Global Production and Rising Stocks
The USDA’s May report projected a record global sugar production of 189.318 MMT for 2025/26, a 4.7% year-over-year increase. Human sugar consumption is also expected to rise to a record 177.921 MMT, but production is outpacing demand growth.
Consequently, global sugar ending stocks are forecast to climb by 7.5% year-over-year to 41.188 MMT. The USDA’s Foreign Agricultural Service (FAS) specifically anticipates record production in Brazil and significant increases in India and Thailand, further solidifying the outlook for ample global supplies.
Frequently Asked Questions about the Sugar Market
What is causing sugar prices to fall?
Sugar prices are currently falling due to a confluence of factors, including a weakening Brazilian real that encourages exports, strong production forecasts from major producers like India and Brazil, and projections of a global sugar surplus.
How does the Brazilian real affect sugar prices?
When the Brazilian real weakens against the U.S. dollar, it makes Brazilian sugar cheaper for international buyers holding dollars. This incentivizes Brazilian producers to export more, increasing global supply and putting downward pressure on sugar prices.
What is the International Sugar Organization’s outlook for sugar supply?
The ISO now forecasts a global sugar surplus of 1.625 million MT for the 2025-26 season, a significant shift from earlier deficit expectations. This surplus is driven by anticipated production increases in India, Thailand, and Pakistan.
Will India’s ethanol policy impact sugar prices?
Potentially, yes. If India raises ethanol prices, sugar mills may divert more sugarcane to ethanol production rather than sugar. This could reduce the supply of sugar available for export, potentially offering some support to prices.
Are global sugar stocks expected to increase?
Yes, the USDA forecasts a significant increase in global sugar ending stocks for the 2025/26 season, projecting a rise of 7.5% year-over-year to 41.188 MMT. This is driven by production growing faster than consumption.
Conclusion: Navigating a Bearish Sugar Market
The global sugar market is currently characterized by strong production signals from key producing countries and a shift towards projected surpluses. The weakening Brazilian real and robust output from India and Brazil are exerting significant downward pressure on prices, pushing both New York and London contracts to multi-year lows.
While policy-driven factors like India’s ethanol incentives and export quotas introduce some complexity, the overwhelming trend points towards ample global sugar availability. Market participants will be closely watching for any changes in production forecasts, currency movements, and government policies that could alter this supply-heavy outlook.
