Sugar Prices Hammered by Outlook for Abundant Sugar Supplies

Sugar prices declined sharply on Tuesday, with NY sugar falling to a 4-year low and London sugar to a 1.5-week low, driven by expectations of increasing global sugar supplies. The USDA projects a 4.7% year-over-year increase in global sugar production for 2025/26, reaching a record 189.318 MMT, with a surplus of 41.188 MMT. While the International Sugar Organization forecasts a global sugar deficit, projections of increased production in India, Brazil and Thailand are weighing on prices.

Analysis

Sugar prices experienced a significant downturn, with July NY world sugar #11 (SBN25) falling -2.66% and August London ICE white sugar #5 (SWQ25) declining -3.02%, although they settled above Monday's multi-year lows, suggesting some support at those levels. The primary driver for the price weakness over the past 2.5 months is the outlook for improving global sugar supplies, significantly shaped by the USDA's May 22 biannual report. This report projects a +4.7% year-over-year increase in global sugar production for 2025/26, reaching a record 189.318 million metric tons (MMT), and forecasts a global sugar surplus of 41.188 MMT, up 7.5% y/y. This bearish outlook is reinforced by anticipated production increases in key exporting nations: India's 2025/26 production is projected by the USDA FAS to rise +25% y/y to 35.3 MMT, supported by favorable monsoon forecasts and increased acreage, while Brazil's 2025/26 output is expected by the same agency to rise +2.3% y/y to a record 44.7 MMT, and Thailand's 2025/26 production is forecast to climb +2% y/y to 10.3 MMT.

However, the market is navigating conflicting near-term supply signals. Brazil's Unica reported that cumulative 2025/26 Center-South sugar output through May is down -11.6% y/y, and Conab, Brazil's government agency, forecasts the 2024/25 Brazil sugar production to fall -3.4% y/y due to drought and heat. Similarly, India's ISMA projects a -17.5% y/y decline in its 2024/25 sugar production to a 5-year low, with current season output (Oct 1-May 15) already down -17%. Furthermore, the International Sugar Organization (ISO) revised its 2024/25 global sugar deficit forecast upwards to a 9-year high of -5.47 MMT, indicating a tighter market in the immediate term than the USDA's longer-term surplus projection suggests. Despite these indicators of current tightness, the prospect of a substantial 2025/26 surplus, coupled with India easing some export restrictions (allowing 1 MMT this season), appears to be the dominant sentiment weighing on prices, pushing NY sugar to a 4-year nearest-futures low earlier in the week.

Key Decisions for Investors

• Investors should remain cautious regarding long sugar positions, given the prevailing bearish sentiment driven by USDA's projections for a significant global surplus in the 2025/26 season.
• Closely monitor actual production data from India and Brazil for the current 2024/25 crop year, as reports from ISMA, Unica, Conab, and the ISO's deficit forecast highlight near-term supply tightness that could introduce price volatility or temporary support against the longer-term bearish outlook.
• Pay particular attention to the progression of India's monsoon season (June-September) and any further announcements regarding its sugar export policies, as these will be critical determinants of actual supply availability and price direction.