Sugar Prices Slide on the Outlook for Robust Global Supplies

Sugar prices are declining, with NY sugar hitting a 3-week low and London sugar a 4-1/4 month low, driven by expectations of a global sugar surplus. The USDA projects a record 189.318 MMT global sugar production for 2025/26, a 4.7% year-over-year increase, leading to a surplus of 41.188 MMT, up 7.5% y/y. Forecasts for increased production in Brazil, India, and Thailand are contributing to the bearish outlook, despite some projections of decreased production from ISMA and the ISO.

Analysis

Sugar prices are experiencing significant downward pressure, with NY sugar reaching a 3-week low and London sugar a 4-1/4 month low, primarily driven by expectations of a substantial global sugar surplus in the 2025/26 season. The USDA's bi-annual report projects a record global production of 189.318 MMT for 2025/26, a 4.7% year-over-year increase, contributing to an anticipated global surplus of 41.188 MMT, up 7.5% y/y. This outlook is supported by USDA FAS forecasts of record 2025/26 production in Brazil (+2.3% y/y to 44.7 MMT), and projections of a 25% y/y increase in India's 2025/26 production to 35.3 MMT due to favorable monsoons, alongside a 2% y/y rise in Thailand's 2025/26 output. However, conflicting data exists for the nearer 2024/25 season: the ISMA projects India's 2024/25 production will fall by 17.5% y/y to a 5-year low, and reported that output from October 1-May 15 was down 17% y/y. Furthermore, the International Sugar Organization (ISO) recently raised its 2024/25 global sugar deficit forecast to a 9-year high of -5.47 MMT and cut its global production forecast. Brazilian production for 2024/25 also faces headwinds, with Unica reporting a 38.6% y/y drop in April's Center-South production and Conab forecasting a 3.4% y/y decline for the season due to drought and heat, potentially losing up to 5 MMT of sugar cane to fires. Despite these near-term concerns, the market appears to be weighing the USDA's longer-term surplus projections more heavily.

Key Decisions for Investors

• Investors should remain cautious on long sugar positions given the USDA's strong bearish forecast for a significant global surplus in 2025/26, which is currently pressuring prices.
• Monitor the divergence between the USDA's 2025/26 surplus outlook and the more constrained 2024/25 production forecasts from ISMA, ISO, and concerning Brazilian crop reports, as this discrepancy could lead to price volatility and short-term trading opportunities.
• Closely track Indian monsoon developments and Brazilian weather and crop recovery data, as these factors will be critical in confirming or challenging the prevailing supply narrative and influencing future price movements.