Sugar Prices Fall to Lowest Levels in More Than 4 Years

Sugar prices recently fell to multi-year lows, primarily driven by robust global supply forecasts from major producers. Brazil's Center-South sugar output is projected to increase significantly, while India anticipates a bumper crop due to strong monsoon rains and increased acreage, potentially leading to higher exports as less sugar is diverted to ethanol. Thailand also expects increased production, contributing to projections of global sugar surpluses by BMI Group and Covrig Analytics for 2025/26. Although the International Sugar Organization forecasts a smaller deficit, the USDA projects record global production and increased ending stocks, collectively exerting downward pressure on prices.

Analysis

Sugar prices experienced significant weakness, with NY sugar falling to a 4.5-year low and London sugar to a 4.25-year low on Friday, reversing a temporary recovery driven by crude oil rallies. This downturn is primarily attributed to robust global supply forecasts from major producing nations, signaling an oversupplied market. The temporary rally from crude oil's impact on ethanol diversion proved insufficient to counter the fundamental bearish pressures.

Brazil's Center-South sugar output rose +10.8% year-over-year in the second half of September, with cumulative 2025-26 output through September up +0.8% year-over-year. Consultant Datagro projects Brazil's 2026/27 production to climb +3.9% to a record 44 MMT, while USDA FAS forecasts 2025/26 production to increase +2.3% to 44.7 MMT. Similarly, India's 2025/26 production is projected to climb +19% to 34.9 MMT by NFCSF, driven by strong monsoon rains and increased acreage, with Sucden suggesting potential exports of 4 MMT due to limited ethanol diversion. Thailand also anticipates increased output, with the Thai Sugar Millers Corp projecting a +5% rise to 10.5 MMT for 2025/26.

These regional increases contribute to global surplus projections, with BMI Group forecasting a 10.5 MMT surplus and Covrig Analytics a 4.1 MMT surplus for 2025/26. While the International Sugar Organization (ISO) projects a small global deficit of -231,000 MT for 2025/26, it also forecasts global production to rise +3.3% to 180.6 MMT. The USDA reinforces the bearish outlook, projecting record global 2025/26 production of 189.318 MMT and a +7.5% increase in ending stocks to 41.188 MMT, indicating a well-supplied market despite the ISO's deficit forecast.

Key Decisions for Investors

• Consider initiating or maintaining short positions in sugar futures, given the persistent bearish outlook driven by robust global supply forecasts and multi-year price lows.
• Closely monitor official production and export data from key producers like Brazil, India, and Thailand, especially India's actual ethanol diversion rates and export volumes, which could further impact global supply.
• Assess the implications of the USDA's forecast for record global production and increased ending stocks, as this provides a strong fundamental basis for continued downward pressure on sugar prices.