Global Sugar Supply Surge and Fund Repositioning Drive March Contract Higher Ahead of Holiday Season

Sugar futures are experiencing a notable rally as the year-end holiday period approaches. March NY world sugar #11 (SBH26) jumped +0.32 cents, gaining +2.21% today, while March London ICE white sugar #5 (SWH26) climbed +9.00 points, up +2.16%. The upside move reflects funds unwinding short positions before the December holidays, when trading volume thins and liquidity drops significantly—a typical pattern as traders reduce exposure during lower activity periods.

Supply Glut From Major Producers Pressures Long-Term Outlook

However, the bounce masks deeper challenges for sugar bulls. Global supply forecasts are pointing toward a major surplus in 2025/26, driven by record or near-record production from the world’s top producers.

India’s Production Boom

India, the world’s second-largest sugar producer, is set to dramatically boost output. The India Sugar Mill Association (ISMA) raised its 2025/26 production forecast to 31 MMT from 30 MMT on November 11, and further hikes followed as crush data came in stronger than expected. From October 1 to December 15, Indian output jumped +28% y/y to 7.83 MMT. Even more bullish, India’s National Federation of Cooperative Sugar Factories is projecting 2025/26 production could reach 34.9 MMT, a +19% y/y jump. This explosive growth follows a depressed 2024/25 season when production fell -17.5% y/y to just 26.1 MMT—a 5-year low.

To relieve the domestic glut, India’s government is considering permitting additional sugar exports. The country previously had a 1.5 MMT export quota approved for 2025/26, but talk of expanding that quota is already weighing on prices. The ISMA also cut its forecast for sugar diverted to ethanol production from 5 MMT to 3.4 MMT, freeing up more cane for sugar exports.

Brazil and Thailand Also Increasing Output

Brazil’s outlook is similarly bearish. Conab, the country’s crop forecasting agency, raised Brazil’s 2025/26 production estimate to 45 MMT on November 4, up from 44.5 MMT. The USDA’s Foreign Agricultural Service (FAS) projects even higher, forecasting 44.7 MMT—a +2.3% y/y gain. Through November, Brazil’s Center-South region had already crushed enough cane to produce 39.904 MMT of sugar, up +1.1% y/y, with 51.12% of total cane being allocated for sugar versus 48.34% in 2024/25.

Thailand, the world’s third-largest producer and second-largest exporter, is also ramping up. The Thai Sugar Millers Corp projected 2025/26 output at 10.5 MMT (+ 5% y/y), with the USDA expecting 10.25 MMT (+2% y/y).

Global Surplus Expanding—A Major Headwind

The combined effect is a massive global surplus. The International Sugar Organization (ISO) on November 17 forecast a 1.625 million MT surplus for 2025/26, a dramatic swing from the 2.916 million MT deficit in 2024/25. Just three months earlier, in August, ISO had predicted only a 231,000 MT deficit—showing how quickly sentiment has shifted as production estimates climbed.

Sugar trader Czarnikow is even more bearish, estimating a surplus of 8.7 MMT for 2025/26, up +1.2 MMT from a September forecast of 7.5 MMT.

The USDA’s bi-annual report, released this week, projects global 2025/26 sugar production rising +4.6% y/y to a record 189.318 MMT. Global consumption will grow more modestly at +1.4% y/y to 177.921 MMT. As a result, global ending stocks are forecast to decline only -2.9% y/y to 41.188 MMT—not enough to absorb the production surge.

Near-Term Rally Faces Structural Headwinds

The fund short-covering providing today’s lift is a short-term phenomenon tied to holiday positioning. The real story is a structural surplus that will likely cap any sustained rally in sugar contracts. With multiple agencies revising production higher and export prospects improving from major suppliers, the fundamental backdrop remains tilted toward lower prices as How Minutes in a Year of trading continues through the final weeks of 2024 and into 2025.