Sugar Prices Continue Higher on Short Covering

Sugar prices rebounded Monday from recent multi-year lows, supported by short-covering and a stronger Brazilian real. However, the overall market outlook remains bearish due to robust global production forecasts, particularly from Brazil, India, and Thailand, which are expected to yield record crops and contribute to a significant global surplus for 2025/26, as projected by Datagro, BMI Group, and USDA. Despite the International Sugar Organization forecasting a smaller deficit, the consensus points to increased supply and rising ending stocks, suggesting continued downward pressure on prices.

Analysis

Sugar prices experienced a temporary rebound on Monday, with NY world sugar #11 closing up +1.52% and London ICE white sugar #5 up +1.83%, reaching a new 1-week high. This rally was primarily driven by short-covering activity and a +0.35% appreciation in the Brazilian real, following significant multi-year lows recorded last week.

Despite this uptick, underlying market fundamentals remain bearish due to robust global production forecasts from key regions. Datagro projects Brazil's Center-South 2026/27 sugar production to climb +3.9% year-over-year to a record 44 MMT, with cumulative 2025-26 output already up +0.9% through mid-October. India's 2025/26 production is expected to surge +19% year-over-year to 34.9 MMT, driven by abundant monsoon rains, while Thailand's 2025/26 crop is forecast to rise +5% to 10.5 MMT.

These significant increases contribute to widespread global surplus projections for 2025/26, with BMI Group forecasting a 10.5 MMT surplus and Covrig Analytics projecting 4.1 MMT. The USDA anticipates global 2025/26 production to climb +4.7% year-over-year to a record 189.318 MMT, leading to a +7.5% increase in global ending stocks. While the ISO projects a small deficit of -231,000 MT, this is a substantial reduction from the prior year's shortfall and contrasts with other agencies' surplus outlooks.

Further bearish pressure stems from the potential for India to export up to 4 MMT of sugar, exceeding earlier expectations, which would add to global supply. This confluence of record production forecasts from major regions and rising global stock levels suggests continued downward pressure on sugar prices.

Key Decisions for Investors

• Investors should consider maintaining a bearish stance on sugar futures, given the strong consensus for a global supply surplus in 2025/26.
• Monitor key producer output data from Brazil, India, and Thailand, alongside global stock projections, for confirmation of the oversupply trend.
• Be cautious of short-term rallies driven by technical factors or currency fluctuations, as these are unlikely to alter the fundamental bearish outlook.