Sugar Prices Fall on the Outlook for Higher Sugar Output in India

Sugar prices are declining due to expectations of increased global sugar production, particularly a projected 19% year-over-year increase in India's 2025/26 output to 35 MMT, driven by expanded cane acreage. This forecast, coupled with USDA projections of a record global production of 189.318 MMT and a surplus of 41.188 MMT, is outweighing concerns about reduced production in Brazil and a raised global deficit forecast by the ISO. Despite some conflicting data from ISMA, the overall sentiment points towards ample supply, pressuring sugar futures to multi-month lows.

Analysis

The current downward pressure on sugar prices, with July NY sugar #11 (SBN25) down -0.65% and August London ICE white sugar #5 (SWQ25) down -0.80%, extends a trend that saw NY sugar reach a 3-3/4 year nearest-futures low. This decline is predominantly driven by expectations of significantly increased global sugar production for the 2025/26 season. India's National Federation of Cooperative Sugar Factories projects a +19% year-over-year rise in the nation's 2025/26 output to 35 MMT, supported by the USDA FAS forecast of a +25% increase to 35.3 MMT, citing larger cane acreage and anticipated favorable monsoon rains (projected at 105% of long-term average). These projections align with the USDA's May 22 biannual report, which forecasted record global 2025/26 sugar production of 189.318 MMT (+4.7% y/y) and a substantial global sugar surplus of 41.188 MMT (+7.5% y/y). Additional bearish factors include USDA FAS projections for record 2025/26 Brazilian production (+2.3% y/y to 44.7 MMT), increased Thai output (+2% y/y to 10.3 MMT), and India's decision to allow 1 MMT of sugar exports this season, easing prior restrictions. However, the market faces conflicting data: India's ISMA forecasts a -17.5% y/y drop in 2024/25 production to a 5-year low of 26.2 MMT, with current season output (Oct 1-May 15) already down -17%. Brazil is also exhibiting near-term production weakness, with Unica reporting a -6.8% y/y fall in Center-South output for the first half of May 2025/26 and Conab projecting a -3.4% y/y decline for Brazil's overall 2024/25 production. Furthermore, the International Sugar Organization (ISO) recently increased its 2024/25 global sugar deficit forecast to a 9-year high of -5.47 MMT. Despite these counter-signals and a reported 'mixed' market sentiment with a score of -0.05, the prevailing price action suggests investors are currently giving more weight to the longer-term 2025/26 surplus forecasts, particularly from the USDA and concerning Indian output, over the immediate 2024/25 supply tightness.

Key Decisions for Investors

• Given the strong bearish outlook for 2025/26 sugar production and projected global surplus, investors should exercise caution with long positions and may consider strategies that benefit from or hedge against further price declines.
• Closely monitor India's monsoon progression and actual 2025/26 planting data, as these are critical to the current bearish thesis and deviations could cause significant market reactions.
• Track Brazil's ongoing 2024/25 harvest results and early 2025/26 production figures, as continued shortfalls there could offer some counter-balance to the broader bearish sentiment and create short-term trading opportunities.
• Note the Teucrium Sugar Fund (CANE) ticker sentiment is notably negative (-0.7), reflecting the prevailing market view, and investors should evaluate positions in sugar-related Exchange Traded Funds accordingly.