Sugar Prices Retreat on Ample Global Supplies

Sugar prices are declining, with NY sugar futures hitting a 4-year low, driven by expectations of a global sugar surplus in 2025/26. The USDA projects a 4.7% year-over-year increase in global sugar production to a record 189.318 million metric tons, leading to a surplus of 41.188 MMT, up 7.5% y/y; increased production in India and Thailand is expected to contribute to the surplus, while reduced production in Brazil offers some price support, however, the International Sugar Organization (ISO) raised its 2024/25 global sugar deficit forecast to a 9-year high of -5.47 MMT.

Analysis

Sugar prices are under significant pressure, with NY sugar futures declining to a four-year low, primarily influenced by forecasts of a substantial global sugar surplus for the 2025/26 season. The USDA's May report projects a 4.7% year-over-year increase in global 2025/26 production to a record 189.318 million metric tons (MMT), leading to an anticipated global surplus of 41.188 MMT (up 7.5% y/y) and a 7.5% rise in global ending stocks. This bearish outlook is underpinned by expected production growth in major producing nations: India's 2025/26 output is projected by its National Federation of Cooperative Sugar Factories to increase by 19% y/y to 35 MMT, and by the USDA's Foreign Agricultural Service (FAS) to rise 25% y/y to 35.3 MMT, supported by forecasts of an above-normal monsoon. Concurrently, Thailand's 2025/26 production is anticipated to climb 2% y/y to 10.3 MMT, after a reported 14% y/y increase to 10.00 MMT for 2024/25, and the USDA FAS also projects Brazil's 2025/26 production will reach a record 44.7 MMT, up 2.3% y/y. However, this longer-term bearish view is contrasted by several near-term bullish indicators. The International Sugar Organization (ISO) recently 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 of 1.31 MMT and directly opposing the USDA's 2025/26 surplus projection. Supporting this near-term tightness, Brazil's Center-South sugar production for the first half of May 2025/26 fell 6.8% y/y, with cumulative output down 22.7% y/y according to Unica, and Conab, Brazil's crop agency, forecasts a 3.4% y/y decline in Brazil's 2024/25 sugar production due to drought and heat. Furthermore, India's ISMA projects a 17.5% y/y drop in 2024/25 production to a 5-year low, with output from October 1 to May 15 already down 17% y/y. Despite these conflicting signals, the market currently appears to be prioritizing the USDA's projections for a large surplus in the 2025/26 crop year.

Key Decisions for Investors

• Investors should exercise caution due to the strong bearish sentiment driven by projections of a significant global sugar surplus for the 2025/26 season, which has pushed prices to multi-year lows.
• It is crucial to closely monitor near-term supply developments, especially actual Brazilian production figures impacted by adverse weather, the realization of India's monsoon, and any further revisions to the ISO's 2024/25 deficit forecast, as these factors could introduce short-term price volatility or challenge the prevailing bearish narrative.
• Consider the divergent timelines and underlying assumptions between the USDA's 2025/26 surplus outlook and the ISO's 2024/25 deficit forecast, alongside conflicting Indian production estimates, to inform strategic positioning and risk assessment for different investment horizons.