Sugar Prices Slump to 4-Year Lows on the Outlook for Abundant Global Supplies

Sugar prices have declined to 4-year lows due to expectations of a global surplus, driven by forecasts of increased production in India, Brazil, and Thailand; the USDA projects a 4.7% year-over-year increase in global sugar production for 2025/26, reaching a record 189.318 MMT. Despite some support from reduced sugar production in Brazil and a higher global sugar deficit forecast by the ISO, the overall outlook points towards ample supplies, weighing on prices, although fund short covering provided a temporary boost to London sugar futures.

Analysis

Sugar prices have reached four-year nearest-futures lows, extending a three-month decline, primarily due to expectations of a significant global supply surplus in the 2025/26 season. The USDA's May 22 report projects a 4.7% year-over-year increase in global 2025/26 sugar production to a record 189.318 million metric tons (MMT), leading to an anticipated global surplus of 41.188 MMT, up 7.5% y/y. This outlook is supported by forecasts of increased output from key producers: India's 2025/26 production is projected to climb by 19-25% y/y (to 35-35.3 MMT) driven by larger acreage and an expected above-normal monsoon (105% of long-term average); Brazil's 2025/26 production is forecast by USDA FAS to rise 2.3% y/y to a record 44.7 MMT; and Thailand's 2025/26 output is expected to increase by 2% y/y to 10.3 MMT. India's decision to allow 1 MMT of sugar exports this season further contributes to bearish sentiment, although this is a partial easing of prior restrictions. Despite the generally bearish long-term outlook driven by these 2025/26 projections, there are conflicting signals for the nearer 2024/25 crop year and current production. 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. Supporting this, Brazil's 2024/25 production was reported by Conab to have fallen -3.4% y/y, and Unica reported Brazil's cumulative Center-South sugar output for the current 2025/26 season through May is down -11.6% y/y. Similarly, India's ISMA projects a -17.5% y/y fall in 2024/25 production to a 5-year low, with output from October to May 15 already down -17% y/y, and 2024/25 export expectations have been tempered. While NY sugar futures declined, London sugar saw a modest rise attributed to fund short covering. The USDA also projects a 1.4% y/y increase in global 2025/26 human sugar consumption to a record 177.921 MMT, with ending stocks climbing 7.5% y/y.

Key Decisions for Investors

• Investors should maintain a cautious to bearish outlook on sugar prices for the medium to long term, given the strong USDA projections for a substantial global surplus in the 2025/26 season, though short-term volatility due to factors like fund short-covering may occur.
• Closely monitor the progression of India's monsoon season (June-September) and actual 2024/25 production figures from Brazil (Unica, Conab) and India (ISMA), as these will be critical in confirming or challenging the anticipated shift towards a significant supply surplus.
• Evaluate the divergence between the ISO's forecast of a 2024/25 global deficit and the USDA's projection of a large 2025/26 surplus to identify potential shifts in market balance and manage positions accordingly, anticipating continued price pressure if surplus expectations solidify.