Sugar Prices Fall as Global Production and Supplies Increase

Sugar prices declined Wednesday, remaining above Tuesday's multi-month lows, pressured by expectations of increased global sugar production, particularly a projected 19% year-over-year rise in India's 2025/26 output to 35 MMT due to expanded cane acreage. While the USDA forecasts a 4.7% increase in global sugar production for 2025/26, reaching a record 189.318 MMT, offsetting factors include reduced production in Brazil and a tighter market forecast by the ISO, which anticipates a 9-year high global sugar deficit.

Analysis

Sugar prices recently experienced declines, with NY sugar futures touching a 3-3/4 year low and London sugar a 4-1/2 month low, largely influenced by expectations of a substantial increase in global sugar production for the 2025/26 season. The USDA's May 22 report underpins this sentiment, projecting a 4.7% year-over-year rise in global 2025/26 production to a record 189.318 million metric tons (MMT), which is anticipated to result in a global sugar surplus of 41.188 MMT, up 7.5% y/y, and global ending stocks climbing by a similar percentage. This outlook is further supported by forecasts for India's 2025/26 production to increase by 19% to 25% (to around 35-35.3 MMT) due to expanded acreage and predictions of an above-normal monsoon (105% of long-term average), alongside a USDA FAS projection for Brazil's 2025/26 output to rise 2.3% y/y to a record 44.7 MMT. However, this bearish long-term forecast for 2025/26 sharply contrasts with a tighter supply scenario depicted for the current 2024/25 season. The International Sugar Organization (ISO), on May 15, revised its 2024/25 global sugar deficit forecast upwards to -5.47 MMT, a 9-year high, while cutting its 2024/25 global production estimate. This near-term tightness is corroborated by ISMA's projection that India's 2024/25 sugar production will decrease by 17.5% y/y to a 5-year low of 26.2 MMT, and Brazil's current Center-South sugar output through mid-May reportedly down -22.7% y/y, with Conab also forecasting a -3.4% y/y decline for Brazil's total 2024/25 production due to adverse weather including drought and fires which reportedly destroyed up to 5 MMT of sugarcane. India's allowance of 1 MMT in sugar exports for the current season, potentially limited to 800,000 MT, provides some market relief but does not resolve the fundamental divergence between the immediate market tightness and the projected future surplus.

Key Decisions for Investors

• Investors should recognize the prevailing market dichotomy, with potential near-term price support stemming from the anticipated 2024/25 global deficit, contrasted against significant longer-term downward pressure from the projected 2025/26 production surplus.
• Closely monitor critical weather developments, particularly India's monsoon performance and growing conditions in Brazil's sugar regions, as well as actual crop outturn data from these key producers, as these factors will be pivotal in confirming or altering future supply forecasts.
• Evaluate investment strategies and time horizons carefully, as the current tight supply situation for 2024/25 may present different trading opportunities compared to the bearish outlook for 2025/26 if production increases materialize as projected.
• Stay vigilant for updated production estimates, consumption figures, and stock-to-use ratio forecasts from authoritative bodies such as the USDA, ISO, Unica, and ISMA, as revisions will significantly influence market sentiment and price trajectories.