Expectations for Abundant Supplies Pressures Sugar Prices

Sugar futures declined, hitting 1.5-week lows, driven by expectations of a global sugar surplus in 2025/26, with Datagro projecting +1.53 MMT and StoneX forecasting +3.74 MMT, a sharp reversal from the 2024/25 deficit. Increased production forecasts from India and Brazil are contributing to the bearish sentiment, though a weaker dollar offered limited support. Conflicting data from ISMA showing a potential decrease in India's 2024/25 sugar production tempers the overall outlook, creating uncertainty despite the prevailing downward pressure on prices.

Analysis

Sugar futures declined to 1.5-week lows, primarily influenced by projections of a substantial global sugar surplus for the 2025/26 season. Datagro forecasts a +1.53 MMT surplus for 2025/26, a significant turnaround from an estimated -4.67 MMT deficit in 2024/25, while StoneX projects an even larger 2025/26 surplus of +3.74 MMT. This bearish outlook for the future crop year is supported by anticipated production increases: India's 2025/26 output is projected by the USDA's Foreign Agricultural Service (FAS) to rise +26% year-over-year to 35 MMT, and Brazil's 2025/26 production is forecast to climb by +2.3% (USDA FAS) to +4.0% (Conab) year-over-year. Additionally, Thailand's 2024/25 sugar production increased +14% y/y to 10.00 MMT. However, the current 2024/25 season presents a more complex and potentially tighter supply picture. The International Sugar Organization (ISO) recently increased its 2024/25 global sugar deficit forecast to -5.47 MMT, a 9-year high, and concurrently lowered its global production estimate for this period. Supporting this view of near-term constraints, India's ISMA projects a -17.5% y/y fall in its 2024/25 production to 26.2 MMT, a 5-year low, with actual output from October 1 to May 15 already down -17% y/y. Conab also forecasts Brazil's 2024/25 sugar production to decrease by -3.4% y/y due to adverse weather. Contradictory signals also emerge from Brazil, where Unica reported that Center-South sugar production for April, attributed to the 2025/26 crop, fell sharply by -38.6% y/y, contrasting with other forecasts predicting a production increase in Brazil for that season. While India has permitted 1 MMT of sugar exports, actual shipments for 2024/25 might be limited to 800,000 MT. A weaker dollar index offered some price support, but the market appears to be predominantly factoring in the anticipated 2025/26 surplus rather than the immediate 2024/25 deficit.

Key Decisions for Investors

• Investors should carefully weigh the prevailing bearish sentiment driven by projected 2025/26 surpluses against the evidence of a tightening 2024/25 market, as indicated by ISO deficit revisions and lower production figures from India for the current season.
• Closely monitor upcoming weather patterns, particularly monsoon performance in India and conditions in Brazil, alongside official production estimates from these key regions, as these will be critical in validating or challenging the long-term surplus narrative.
• Given the conflicting short-term (2024/25 tightness) and medium-term (2025/26 surplus) forecasts, consider that current prices may largely reflect the anticipated surplus, but be prepared for potential volatility if the near-term deficit proves more impactful than currently discounted.