Sugar Prices Remain Weak on Expectations for a Global Surplus

Sugar prices are consolidating after a recent downtrend driven by expectations of a global surplus, with NY sugar holding above Thursday's 4-year low. The USDA projects a 4.7% increase in global sugar production for 2025/26, reaching a record 189.318 MMT, with India's production potentially rising significantly due to favorable monsoon forecasts; however, reduced sugar production in Brazil and a higher global sugar deficit forecast by the ISO provide some price support.

Analysis

Sugar prices exhibit minimal change, with July NY world sugar #11 (SBN25) unchanged and August London ICE white sugar #5 (SWQ25) up marginally by +0.06%, as NY sugar consolidates above Thursday's four-year nearest-futures low. This consolidation follows a two-month downtrend driven by expectations of a significant global sugar surplus. The USDA's biannual report projects global 2025/26 sugar production to increase by 4.7% year-over-year to a record 189.318 million metric tons (MMT), forecasting a global sugar surplus of 41.188 MMT. This outlook is heavily influenced by anticipated production increases in major producing countries: India’s 2025/26 output is projected to climb by 19% to 35 MMT (National Federation of Cooperative Sugar Factories) or even 25% to 35.3 MMT (USDA FAS), supported by larger cane acreage and forecasts of an above-normal monsoon (105% of long-term average). Similarly, the USDA FAS predicts Brazil's 2025/26 sugar production will rise 2.3% y/y to a record 44.7 MMT, and Thailand's 2025/26 production is expected to increase by 2% y/y to 10.3 MMT. Adding to bearish sentiment, the Indian government has permitted 1 MMT of sugar exports this season, easing 2023 restrictions. However, these longer-term bearish forecasts for 2025/26 contrast with more immediate supply concerns. The International Sugar Organization (ISO) recently raised its 2024/25 global sugar deficit forecast to a 9-year high of -5.47 MMT, signaling a tightening market following a 1.31 MMT surplus in 2023/24. This near-term tightness is supported by current production challenges: Brazil's Unica reported a 6.8% y/y fall in Center-South sugar production for the first half of May (part of its current harvest campaign) and Conab noted Brazil's 2024/25 production fell 3.4% y/y due to adverse weather. In India, the ISMA projects 2024/25 sugar production will fall 17.5% y/y to a 5-year low, with output from October 1 to May 15 already down 17% y/y, and 2024/25 exports potentially limited to 800,000 MT, below the 1 MMT allowance.

Key Decisions for Investors

• The conflicting short-term deficit outlook for 2024/25 (ISO) versus the projected long-term surplus for 2025/26 (USDA) suggests potential for heightened price volatility, necessitating diligent monitoring of evolving global production data.
• Investors should closely track Indian monsoon performance between June and September and ongoing Brazilian harvest results, as these are pivotal factors that will either confirm or challenge the divergent production forecasts from key agencies.
• Given the current price consolidation above a multi-year low amidst these mixed signals, market participants might consider the potential for range-bound trading in the near term, while exercising caution on substantial directional commitments until greater clarity on the 2024/25 and 2025/26 supply balance emerges.