Sugar Prices Slump to 4-Year Lows as the Global Supply Outlook Improves

Sugar prices have declined to 4-year lows, driven by expectations of a global sugar surplus, with the USDA projecting a 4.7% year-over-year increase in global sugar production for 2025/26. Contributing to the bearish outlook is the anticipation of higher sugar production in India and Brazil, although reduced sugar production in Brazil and a raised global sugar deficit forecast from the ISO offer some price support; fund short covering also lifted London sugar off its lows.

Analysis

Sugar prices have extended their three-month decline, reaching four-year nearest-futures lows, predominantly influenced by expectations of a substantial global sugar surplus in the 2025/26 season. The USDA's biannual report projects a record global production of 189.318 million metric tons (MMT) for 2025/26, a +4.7% year-over-year increase, which is anticipated to result in a global sugar surplus of 41.188 MMT, up 7.5% y/y. This bearish outlook is reinforced by specific regional forecasts: India's National Federation of Cooperative Sugar Factories projects the country's 2025/26 production will climb +19% y/y to 35 MMT, supported by larger cane acreage and forecasts of an above-normal monsoon (105% of long-term average). Similarly, the USDA's Foreign Agricultural Service anticipates Brazil's 2025/26 sugar production will rise +2.3% y/y to a record 44.7 MMT, India's production to increase +25% y/y to 35.3 MMT, and Thailand's to grow +2% y/y to 10.3 MMT. Further pressuring prices, the Indian government announced it would allow 1 MMT of sugar exports this season. Conversely, some data points suggest near-term market tightness. The International Sugar Organization (ISO) recently raised its 2024/25 global sugar deficit forecast to a nine-year high of -5.47 MMT and reduced its 2024/25 global production estimate to 174.8 MMT. Current production figures also offer some support: Brazil's Center-South sugar output through May for the 2025/26 crop is down -11.6% y/y, and Conab reported Brazil's 2024/25 production fell -3.4% y/y. In India, the ISMA projects 2024/25 production will drop -17.5% y/y to a five-year low, with output from October 1 to May 15 already down -17%; Indian Food Secretary Chopra also suggested 2024/25 exports might only reach 800,000 MT, below earlier expectations. Despite these counter-signals and temporary price lifts from fund short covering in the London market, the prevailing market sentiment appears to be shaped by the more distant, larger projected surplus for 2025/26.

Key Decisions for Investors

• Investors should recognize that the dominant driver for current sugar price weakness is the forecast of a significant global supply surplus for the 2025/26 crop year, as projected by the USDA and supported by optimistic production outlooks from India and Brazil.
• Closely monitor upcoming Indian monsoon performance and actual production data from both Brazil (Unica reports) and India (ISMA reports) for the ongoing 2024/25 and nascent 2025/26 crop years, as deviations from expectations could introduce volatility, especially given the ISO's conflicting forecast of a deepened 2024/25 deficit.
• While technical factors like fund short covering may provide short-term price support, the fundamental outlook for 2025/26 remains bearish; any sustained price recovery would likely require significant downward revisions to these future supply estimates or unexpected adverse weather events in key growing regions.