Sugar Prices Fall on ISO's Forecast for a Sugar Surplus

Sugar futures fell (March NY -1.07%, March London -1.81%) after the International Sugar Organization reversed to a 1.625 million‑ton surplus forecast for 2025‑26 (from a 2.916 million‑ton deficit), forecasting global production up 3.2% to 181.8 MMT; that downtick follows last week’s multi‑year lows in nearest‑futures. Broader agency and industry estimates—Conab raising Brazil to 45 MMT, ISMA lifting India to 31 MMT while trimming ethanol diversion and India allowing a 1.5 MMT export quota, Czarnikow and the USDA/FAS projecting larger global output and rising ending stocks—signal materially heavier supply from Brazil, India and Thailand, exerting sustained bearish pressure on prices, though outcomes remain sensitive to export quotas and domestic policy shifts.

Analysis

March NY sugar futures fell 0.16 (‑1.07%) and March London white sugar fell 7.70 (‑1.81%) after the International Sugar Organization swung its 2025/26 outlook to a 1.625 million MT surplus from a 2.916 million MT deficit in 2024/25, and after ISO raised expected global production by 3.2% to 181.8 MMT (versus an August ISO forecast of a 231,000 MT deficit). Market technicals show pressure: London nearest‑futures hit a 4.75‑year low and New York nearest‑futures hit a 5‑year low within the past week, reflecting rapidly repriced expectations for supply.

Multiple independent supply signals underpin the bearish re‑rating: Conab raised Brazil’s 2025/26 sugar estimate to 45 MMT, Unica reported Center‑South cumulative output through October at 38.085 MMT and a +16.4% y/y jump in late‑October output, Czarnikow raised its 2025/26 surplus estimate to 8.7 MMT, and ISMA lifted India’s output view to 31 MMT while lowering ethanol diversion to 3.4 MMT, increasing exportable availability. India's food ministry allowing a 1.5 MMT export quota (below earlier 2 MMT estimates) and a monsoon 8% above normal (937.2 mm) further suggest higher exportable supplies that weigh on prices.

The USDA/FAS projects even larger global production (189.318 MMT) and rising ending stocks to 41.188 MMT in 2025/26, reinforcing the consensus of heavier supplies. Near‑term price direction will remain sensitive to policy shifts (India export quotas and ethanol diversion), subsequent Conab/Unica/ISMA updates and any weather shocks that could reverse current surplus expectations.

Key Decisions for Investors

• Trim or hedge existing long sugar exposure and consider initiating modest short futures positions or buying put options given the mounting, cross‑agency evidence of a 2025/26 global surplus and recent multi‑year lows
• Monitor near‑term catalysts (India export quota announcements, ISMA ethanol diversion figures, Conab/Unica monthly updates and USDA/FAS revisions) and reduce directional exposure if these confirm growing exportable supplies
• Maintain a small, optionality‑based long allocation (cheap calls or tight call spreads) rather than large outright longs to capture upside if weather or policy unexpectedly tightens supply