Forecasts for a Global Sugar Surplus Undercut Prices

Sugar prices extended recent losses, with London sugar reaching a two-week low, primarily due to projections of a global surplus for the 2025/26 season, notably Covrig Analytics forecasting a +4.1 MMT surplus. This bearish outlook is fueled by expectations of increased production and exports from key regions: Brazil's Center-South output rose +15.7% year-over-year in early September, while India anticipates a bumper crop from strong monsoon rains, potentially leading to 4 MMT in exports. Thailand also projects a +5% year-over-year increase in its 2025/26 sugar crop, collectively pointing to an oversupplied market despite some conflicting forecasts.

Analysis

March NY world sugar 11 (SBH26) today is down -0.30 (-1.80%), and December London ICE white sugar 5 (SWZ25) is down -7.60 (-1.66%). Sugar prices today extended Tuesday's losses, with London sugar falling to a 2-week low. Sugar prices are falling due to a negative carryover from Tuesday, when Covrig Analytics projected a global sugar surplus of +4.1 MMT for the 2025/26 season. NY sugar initially climbed to a 1.75-month high on Tuesday on signs of lower sugar content from this year's Brazil sugar crush. Last Thursday, Unica reported that the sugar content in Brazil's Center-South sugarcane crushed cane in the first half of September dropped to 154.58 kilograms per ton (kg/ton) compared to 160.07 kg/ton in the same period a year earlier. Higher sugar output in Brazil is bearish for prices. Unica reported last Thursday that Brazil's Center-South sugar output in the first half of September rose by +15.7% y/y to 3.622 MT. Also, the percentage of sugarcane crushed for sugar by Brazil's sugar mills in the second half of August increased to 53.49% from 47.74% the same time last year. However, cumulative 2025-26 Center-South sugar output through mid-September fell -0.1% y/y to 30.388 MMT. The outlook for higher sugar exports from India is negative for sugar prices, as abundant monsoon rains may produce a bumper sugar crop. India's Meteorological Department reported last Tuesday that the cumulative monsoon rain in India as of September 30 was 937.2 mm, 8% above normal and the strongest monsoon in 5 years. On June 2, India's National Federation of Cooperative Sugar Factories projected that India's 2025/26 sugar production would climb +19% y/y to 34.9 MMT, citing larger planted cane acreage. That would follow a -17.5% y/y decline in India's sugar production in 2024/25 to a 5-year low of 26.2 MMT, according to the Indian Sugar Mills Association (ISMA). Another bearish factor for sugar was the recent assertion from sugar trader Sucden that India may divert 4 MMT of sugar to make ethanol in 2025/26, which is not enough to ease the country's sugar surplus and may prompt India's sugar mills to export as much as 4 MMT of sugar, above earlier expectations of 2 MMT. India is the world's second-largest producer of sugar. The outlook for higher sugar production in Thailand is bearish for prices after the Thai Sugar Miller Corp projected last Wednesday that Thailand's 2025/26 sugar crop will increase by +5% y/y to 10.5 MMT. On May 2, Thailand's Office of the Cane and Sugar Board reported that Thailand's 2024/25 sugar production rose +14% y/y to 10.00 MMT. Thailand is the world's third-largest sugar producer and the second-largest exporter of sugar. On August 19, Conab, Brazil's government crop forecasting agency, cut its Brazil 2025/26 production estimate by 3.1% to 44.5 MMT from a previous estimate of 45.9 MMT. In July, Conab reported that 2024/25 Brazil sugar production fell by -3.4% y/y to 44.118 MMT, citing lower sugarcane yields due to drought and excessive heat. On August 29, the International Sugar Organization (ISO) forecast a global sugar deficit for the 2025/26 season, the sixth consecutive year of sugar deficits. ISO projects a global 2025/26 sugar deficit of -231,000 MT, down from the -4.88 MMT shortfall in 2024/25. ISO also projects 2025/26 global sugar production will rise by +3.3% y/y to 180.6 MMT, and 2025/26 global sugar consumption will increase +0.3% y/y to 180.8 MMT. The USDA, in its bi-annual report released May 22, projected that global 2025/26 sugar production would climb +4.7% y/y to a record 189.318 MMT and that global 2025/26 human sugar consumption would increase +1.4% y/y to a record 177.921 MMT. The USDA also forecasted that 2025/26 global sugar ending stocks would climb +7.5% y/y to 41.188 MMT. The USDA's Foreign Agricultural Service (FAS) predicted that Brazil's 2025/26 sugar production would rise +2.3% y/y to a record 44.7 MMT FAS predicted that India's 2025/26 sugar production would rise +25% y/y to 35.3 MMT due to favorable monsoon rains and increased sugar acreage. FAS predicted that Thailand's 2025/26 sugar production will climb +2% y/y to 10.3 MMT. On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. Sugar prices, notably NY world sugar and London ICE white sugar, extended recent losses, with London sugar reaching a two-week low, driven by projections of a global surplus for the 2025/26 season. Covrig Analytics forecasts a significant +4.1 MMT global sugar surplus, contrasting with the International Sugar Organization's (ISO) more modest deficit projection of -231,000 MT. This bearish sentiment reflects an anticipated shift in the supply-demand balance due to strong production outlooks from major producers. Brazil's Center-South sugar output rose +15.7% year-over-year to 3.622 MT in early September, with a higher percentage of sugarcane (53.49%) directed to sugar production. While Conab slightly cut its 2025/26 estimate to 44.5 MMT, the USDA's FAS projects a record 44.7 MMT (+2.3% y/y). India is poised for a bumper crop, with 2025/26 production expected to climb +19% year-over-year to 34.9 MMT due to 5-year high monsoon rains (+8% above normal), potentially leading to 4 MMT of exports. Thailand also contributes to the bearish outlook, with its 2025/26 sugar crop projected to increase +5% year-over-year to 10.5 MMT. The cumulative impact of these production increases, particularly from the world's second and third-largest producers, is weighing heavily on market sentiment, overriding earlier concerns about sugar content in Brazil or ISO's deficit forecast. The market is clearly reacting to the strong indications of global oversupply.

Key Decisions for Investors

• Monitor global supply-side developments closely, especially actual harvest data and export policies from Brazil, India, and Thailand, as these will dictate the true extent of the projected surplus.
• Evaluate existing long positions in sugar futures or related commodity-linked equities, as the market's strong negative reaction suggests further downward pressure.
• Consider hedging strategies or short positions, particularly if subsequent reports corroborate the higher production forecasts and potential increase in global sugar exports.