Sugar Prices Sink as Global Production and Supplies Set to Increase

Sugar prices are declining, with NY sugar futures hitting a near 4-year low and London sugar reaching a 4 1/2-month low, driven by expectations of a global sugar surplus. The USDA projects a 4.7% year-over-year increase in global sugar production for 2025/26, reaching a record 189.318 MMT, and India's 2025/26 sugar production is projected to rise 25% due to favorable monsoon rains, further contributing to the bearish outlook, although the ISO forecasts a global sugar deficit.

Analysis

Sugar prices are experiencing a sustained selloff, with NY world sugar #11 reaching a near four-year nearest-futures low and August London ICE white sugar #5 sliding to a 4.5-month low, primarily driven by expectations of a significant global sugar surplus in the 2025/26 season. The USDA, in its May biannual report, projects a record global production of 189.318 million metric tons (MMT) for 2025/26, a 4.7% year-over-year increase, leading to an anticipated global sugar surplus of 41.188 MMT. This outlook is substantially supported by forecasts of higher output from key producers: India's National Federation of Cooperative Sugar Factories projects the nation's 2025/26 sugar production to climb +19% y/y to 35 MMT, while the USDA's Foreign Agricultural Service (FAS) projects a +25% y/y rise to 35.3 MMT, citing larger planted acreage and an expected above-normal monsoon forecasted at 105% of the long-term average. Similarly, Brazil's 2025/26 sugar production is projected by USDA FAS to rise +2.3% y/y to a record 44.7 MMT, and Thailand's 2025/26 production is expected to climb +2% y/y to 10.3 MMT. Adding to bearish sentiment, the Indian government announced it would allow 1 MMT of sugar exports this season, easing previous restrictions. However, conflicting data introduces notable complexity. The International Sugar Organization (ISO) on May 15 raised its 2024/25 global sugar deficit forecast to a 9-year high of -5.47 MMT and cut its 2024/25 global production forecast. Current production figures from Brazil's Center-South region, reported by Unica, show a year-over-year decline for the first half of May (-6.8%) and cumulatively for the 2025/26 season through mid-May (-22.7%). Conab, Brazil's crop agency, also projected the country's 2024/25 sugar production to fall -3.4% y/y due to drought and heat. In India, the ISMA projects a -17.5% y/y fall in 2024/25 production to a 5-year low, with actual output from October 1 to May 15 down -17% from the prior year. Despite these nearer-term supply concerns and a projected 1.4% rise in global human sugar consumption for 2025/26 (USDA), the market appears to be predominantly pricing in the larger, longer-term surplus scenario.

Key Decisions for Investors

• Investors should acknowledge the prevailing bearish pressure on sugar prices, primarily stemming from USDA and key national forecasts for a substantial global surplus in the 2025/26 season.
• Close monitoring of actual crop development, particularly weather patterns such as India's monsoon and conditions in Brazil, alongside interim production reports from Unica (Brazil) and ISMA (India), is critical to assess the materialization of these supply forecasts against the ISO's conflicting 2024/25 deficit projection.
• Given that sugar prices have reached multi-year lows, investors should evaluate whether the bearish surplus news is largely priced in, or if confirmation of bumper crops, especially in late 2024 and into 2025, could precipitate further downside, thus warranting cautious positioning and diligent tracking of export policy adjustments from major producers like India.