Sugar Prices Undercut on Higher Sugar Output in India

Sugar prices are mixed, with NY sugar futures hitting a 3-3/4 year low due to expectations of increased sugar production in India, where 2025/26 output is forecasted to rise 19% Y/Y. London sugar rebounded from a 4-1/2 month low, supported by a rally in crude oil prices, which could incentivize ethanol production over sugar. Overall, sugar prices have been pressured by expectations of a global surplus, as the USDA projects a 4.7% Y/Y increase in global sugar production for 2025/26.

Analysis

Sugar markets are exhibiting mixed signals, with July NY world sugar #11 futures declining -0.24% to a 3-3/4 year nearest-futures low, primarily pressured by forecasts of significantly higher Indian sugar production for the 2025/26 season. India's National Federation of Cooperative Sugar Factories projects a +19% year-over-year increase to 35 MMT for 2025/26, citing larger planted cane acreage. This aligns with a broader bearish outlook for the 2025/26 period, as the USDA's May 22 report projected global production to rise +4.7% y/y to a record 189.318 MMT, leading to an anticipated global sugar surplus of 41.188 MMT, up +7.5% y/y. The USDA FAS also forecasts record Brazilian output at 44.7 MMT (+2.3% y/y) and robust Indian production at 35.3 MMT (+25% y/y) for 2025/26. Conversely, London ICE white sugar #5 futures rose +0.11%, rebounding from a 4-1/2 month low, partly due to short covering spurred by a rally in WTI crude oil, which may incentivize diverting more cane crushing to ethanol. Conflicting data further complicates the near-term (2024/25) outlook: the Indian Sugar Mills Association (ISMA) projects India's 2024/25 sugar production to fall -17.5% y/y to a 5-year low of 26.2 MMT, and reported that Indian production from October 1 to May 15 was down -17% from the previous year. Similarly, Brazil's 2025/26 Center-South sugar output through mid-May is reported down -22.7% y/y by Unica, and Conab projects a -3.4% y/y decline in Brazil's 2024/25 production due to adverse weather. Adding to this near-term tightness, the International Sugar Organization (ISO) on May 15 raised its 2024/25 global sugar deficit forecast to a 9-year high of -5.47 MMT, a significant tightening from the 2023/24 surplus and contrasting sharply with the anticipated 2025/26 surplus. This divergence between a potentially tighter 2024/25 market and a projected surplus in 2025/26 contributes to current price volatility and the mixed sentiment reflected in the market signals.

Key Decisions for Investors

• Evaluate positions considering the pronounced divergence between the International Sugar Organization's projected 2024/25 global deficit and the USDA's forecasted 2025/26 global surplus, as this timeline discrepancy is a key driver of current volatility.
• Actively monitor near-term catalysts such as India's monsoon performance and actual cane acreage, Brazilian harvest yields and weather developments, alongside crude oil price movements, as these factors will directly impact cane diversion to ethanol and overall sugar supply.
• Maintain flexibility in trading strategies, as the conflicting data from various agencies (ISMA, Unica, USDA, ISO) regarding production in key regions like India and Brazil suggests continued price uncertainty until a dominant supply narrative emerges.