Sugar Prices Plunge on the Outlook for Improving Global Supplies

Sugar prices are sharply lower, with NY sugar futures down -2.78% and London sugar down -2.69%, pressured by expectations of increasing global sugar supplies; the USDA projects a +4.7% year-over-year increase in global 2025/26 sugar production to a record 189.318 MMT and a surplus of 41.188 MMT. Contributing to the bearish outlook is India's projected +19% increase in 2025/26 sugar production due to larger planted cane acreage and expectations of abundant rainfall, although conflicting reports from ISMA suggest a potential -17.5% y/y decrease in India's 2024/25 production.

Analysis

Sugar futures experienced a sharp decline, with July NY sugar (SBN25) down -2.78% and August London sugar (SWQ25) down -2.69%, primarily pressured by the outlook for improving global sugar supplies for the 2025/26 season, although prices remain above recent multi-year lows. The USDA's May 22 report is a key driver, projecting a +4.7% year-over-year (y/y) increase in global 2025/26 sugar production to a record 189.318 million metric tons (MMT), leading to an anticipated global sugar surplus of 41.188 MMT, up 7.5% y/y. This bearish sentiment is amplified by production forecasts for major producers in 2025/26: India's output is projected by its National Federation of Cooperative Sugar Factories to climb +19% y/y to 35 MMT (USDA FAS projects +25% y/y to 35.3 MMT), supported by an expected above-normal monsoon. Brazil's 2025/26 production is forecast by USDA FAS to rise +2.3% y/y to a record 44.7 MMT, and Thailand's 2025/26 production is anticipated to increase +2% y/y to 10.3 MMT, following a significant +14% y/y rise to 10.00 MMT in 2024/25. India's decision to allow 1 MMT of sugar exports this season also contributes to supply expectations. However, countervailing data points towards potential tightness in the current 2024/25 season. The International Sugar Organization (ISO) raised its 2024/25 global sugar deficit forecast to a 9-year high of -5.47 MMT. Supporting this, India's ISMA projects a -17.5% y/y decrease in 2024/25 production to a 5-year low, with Oct 1-May 15 output already down -17% y/y, and 2024/25 exports potentially limited to 800,000 MT. Furthermore, Brazil's current 2024/25 crop shows signs of weakness: Conab forecasts a -3.4% y/y production decline, and Unica reported cumulative 2025/26 Center-South output (representing the current harvest's early stages) through May was down -11.6% y/y. The market is therefore navigating conflicting signals: strong expectations of a supply surplus in the 2025/26 marketing year versus indications of a tighter balance for the ongoing 2024/25 period.

Key Decisions for Investors

• Investors should recognize the dominant bearish pressure on 2025 sugar futures, stemming from projections of a substantial global production increase and surplus in the 2025/26 season, particularly from the USDA and key producers like India and Brazil.
• It is crucial to monitor near-term 2024/25 supply developments, including Brazil's ongoing harvest results (Unica, Conab) and India's actual 2024/25 production relative to ISMA's pessimistic forecasts, as confirmation of a significant 2024/25 global deficit (per ISO) could offer short-term price support or induce volatility against the longer-term bearish outlook.
• Consider evaluating strategies that address the divergence between the forecasted 2024/25 deficit and the projected 2025/26 surplus, such as assessing calendar spread opportunities or adjusting market entry and exit timing based on conviction in either the near-term tightness or the longer-term oversupply narrative.