Sugar Prices Fall Sharply on Outlook for Robust Global Supplies

Sugar prices declined sharply, with NY sugar futures hitting a 3-3/4 year low and London sugar a 4-1/4 month low, driven by expectations of a growing global sugar surplus. The USDA projects a record 189.318 MMT global sugar production for 2025/26, a 4.7% year-over-year increase, leading to a surplus of 41.188 MMT, up 7.5% y/y; however, conflicting reports from ISMA and ISO create uncertainty, with ISMA projecting lower Indian production and the ISO forecasting a larger global sugar deficit.

Analysis

Sugar prices experienced a significant sell-off, with NY sugar futures reaching a 3-3/4 year low and London sugar a 4-1/4 month low, primarily attributed to mounting expectations of a global sugar surplus. The USDA's recent biannual report projects a record global sugar production of 189.318 million metric tons (MMT) for 2025/26, a 4.7% year-over-year increase, which would result in a global surplus of 41.188 MMT, up 7.5% y/y. This outlook is supported by USDA FAS projections of record 2025/26 production in Brazil (+2.3% y/y to 44.7 MMT), a substantial rise in India (+25% y/y to 35.3 MMT due to favorable monsoons), and an increase in Thailand (+2% y/y to 10.3 MMT). Further bearish sentiment stems from India's Ministry of Earth Sciences forecasting an above-normal monsoon and the Indian government's decision to allow 1 MMT of sugar exports this season. However, this bearish outlook is contested by several other reports. The International Sugar Organization (ISO) on May 15 revised its 2024/25 global sugar deficit forecast upwards to a 9-year high of -5.47 MMT and cut its 2024/25 global production estimate, signaling a tightening market. Similarly, for India, the ISMA projects a -17.5% y/y decrease in 2024/25 production to a 5-year low and reported current season output (Oct 1-May 15) is down -17% y/y. Brazil's near-term production also shows weakness, with Unica reporting a -38.6% y/y drop in April 2025/26 Center-South production and Conab forecasting a -3.4% y/y decline for Brazil's 2024/25 crop due to drought and heat. These divergent forecasts, particularly concerning the 2024/25 versus 2025/26 seasons and between major agencies, create considerable uncertainty in the sugar market outlook.

Key Decisions for Investors

• Given the sharp price declines to multi-year lows and the USDA's forecast of a substantial 2025/26 surplus, investors should exercise caution regarding new long positions in sugar futures until more clarity emerges on actual production levels.
• Closely monitor incoming production data from Brazil and India, actual monsoon performance, and revised forecasts from entities like the ISO and ISMA, as these present conflicting signals to the USDA's dominant bearish outlook and could indicate potential market shifts.
• Evaluate the significant divergence between the USDA's long-range surplus forecast for 2025/26 and the ISO's projection of a deepening deficit for the 2024/25 season, as resolving this discrepancy will be key to future price direction and could lead to volatility.