Sugar Prices Weighed Down by Expectations for Ample Supplies

Sugar prices are declining, hitting 1.5-week lows, driven by expectations of a global sugar surplus in 2025/26, with Datagro projecting a +1.53 MMT surplus and StoneX forecasting +3.74 MMT, a sharp reversal from the 2024/25 deficit; however, conflicting reports persist as the ISO forecasts a 9-year high deficit of -5.47 MMT due to reduced production forecasts, creating uncertainty in the sugar market outlook.

Analysis

Sugar prices are experiencing renewed downward pressure, with July NY #11 futures declining -1.03% and August London #5 futures down -0.63%, reaching 1.5-week lows. This movement is primarily attributed to emerging expectations of a significant global sugar surplus for the 2025/26 season. Consultant Datagro projects this surplus at +1.53 million metric tons (MMT), a stark recovery from an anticipated -4.67 MMT deficit in 2024/25, while StoneX forecasts an even larger 2025/26 surplus of +3.74 MMT. Supporting this bearish outlook are projections of increased production from key regions: India's 2025/26 output is expected by USDA FAS to rise +26% year-over-year (y/y) to 35 MMT, buoyed by favorable monsoon forecasts (105% of long-term average), and Brazil's 2025/26 production is anticipated by USDA FAS and Conab to climb +2.3% and +4.0% y/y respectively. Further weighing on sentiment, Thailand's 2024/25 production has already risen +14% y/y to 10.00 MMT. However, this forward-looking optimism for 2025/26 contrasts sharply with persistent concerns for the current 2024/25 season. The International Sugar Organization (ISO) recently intensified these concerns by raising its 2024/25 global sugar deficit forecast to a 9-year high of -5.47 MMT and concurrently cutting its global production estimate for the same period to 174.8 MMT. This deficit narrative is substantiated by reports from India, where ISMA projects 2024/25 production to fall -17.5% y/y to a 5-year low of 26.2 MMT, with actual output from Oct 1-May 15 already down -17% y/y, and potential exports possibly limited to 800,000 MT, below the 1 MMT allowance. Brazil also faces near-term challenges for its 2024/25 crop, with Conab forecasting a -3.4% y/y production decrease and Unica reporting a -5.3% y/y fall in Center-South output through March. Conflicting signals also emerge for Brazil's new 2025/26 crop year; despite optimistic overall production forecasts from USDA FAS and Conab, Unica reported that Center-South sugar production for April, the start of the new season, fell sharply by -38.6% y/y. Even the USDA's November 2023 report for the 2024/25 season, while projecting record global production, also forecasted record consumption and a notable -6.1% y/y decline in global ending stocks, signaling underlying market tightness. The market is thus navigating a complex interplay of bearish long-term supply expectations against bullish short-to-medium term deficit realities, fostering significant uncertainty.

Key Decisions for Investors

• Investors should closely monitor upcoming production data and weather developments in key regions like India and Brazil, as these will be crucial in clarifying the conflicting supply outlooks for the 2024/25 and 2025/26 seasons.
• Given the pronounced divergence between projections of a future surplus (2025/26) and evidence of a current season deficit (2024/25), anticipate continued sugar price volatility and consider strategies that account for potential sharp movements in either direction.
• It is prudent to carefully weigh the impact of short-term supply tightness, as highlighted by the ISO's deficit forecast and current production shortfalls in India and Brazil, against the longer-term bearish pressure from anticipated large crops in 2025/26 when making or adjusting investment positions.