Robust Global Production and Abundant Supplies Weigh on Sugar Prices

Sugar prices are declining, pressured by expectations of a global surplus driven by increased production forecasts from India, Brazil, and Thailand; India's 2025/26 sugar production is projected to climb +19% y/y, while the USDA forecasts a +4.7% y/y increase in global production. Countering this bearish sentiment, reduced sugar production in Brazil and a revised global sugar deficit forecast from the ISO offer some support, however, the overall outlook points towards continued downward pressure on sugar prices.

Analysis

Sugar prices are currently experiencing downward pressure, evidenced by declines in July NY sugar #11 (-0.83%) and August London ICE white sugar #5 (-1.06%) futures, although they remain above recent significant multi-year and multi-month lows. The primary driver for this bearish sentiment is the outlook for a substantial global sugar surplus in the 2025/26 season; the USDA projects a record global production of 189.318 million metric tons (MMT), a +4.7% year-over-year increase, culminating in a global surplus of 41.188 MMT. This anticipated surplus is largely attributed to strong production forecasts from key producers: India's 2025/26 output is expected to climb significantly, with projections ranging from +19% y/y (National Federation of Cooperative Sugar Factories) to +25% y/y (USDA FAS) to approximately 35 MMT, supported by larger planted acreage and an expected above-normal monsoon (105% of long-term average). Concurrently, Brazil's 2025/26 production is forecast by USDA FAS to rise +2.3% y/y to a record 44.7 MMT, and Thailand's output is also projected to increase. India's decision to permit 1 MMT in sugar exports for the current season further contributes to perceived supply availability, weighing on prices.

Conversely, the market faces conflicting signals when considering the current 2024/25 season. The International Sugar Organization (ISO) recently revised its 2024/25 global sugar deficit forecast upwards to -5.47 MMT, a 9-year high, and cut its global production estimate, indicating a tightening market compared to the 2023/24 surplus of 1.31 MMT. This view is supported by reports of reduced current season production in Brazil, where Unica data shows Center-South output for the first half of May (2025/26 crop year start) fell -6.8% y/y, with cumulative output down -22.7% y/y. For the 2024/25 season, Brazil's Conab projects a -3.4% y/y production decline due to prior adverse weather. Furthermore, India's ISMA projects a -17.5% y/y decline in its 2024/25 production to a 5-year low, with actual output from October 1 to May 15 already down -17% from the previous year. Despite these factors suggesting near-term supply constraints for the 2024/25 season, the dominant market narrative, influencing futures for 2025 delivery, appears to be shaped by the anticipated oversupply in 2025/26.

Key Decisions for Investors

• Investors should closely monitor actual production outcomes versus forecasts for India and Brazil for both the 2024/25 and 2025/26 seasons, as deviations could significantly impact price direction.
• The conflicting outlooks between a tighter 2024/25 market, evidenced by the ISO's deficit forecast, and a potential 2025/26 surplus, projected by the USDA, may create short-term price volatility, warranting a cautious approach to new long positions until the 2025/26 supply picture becomes clearer.
• Consider the implications of India's monsoon performance and evolving export policies, as these remain critical variables influencing global sugar balances and future price trends.