Global Sugar Rally Faces Headwinds from Record Harvest Forecasts

Sugar futures experienced a substantial surge on Friday, with New York sugar #11 (SBH26) gaining +0.25 points (+1.68%) and London ICE white sugar #5 (SWH26) advancing +5.20 (+1.23%). The rally pushed NY sugar to a 2-week peak while London sugar reached a 1-week high. A strengthening Brazilian real against the dollar provided near-term support, as the currency appreciation against the USD reduced export competitiveness and triggered short-covering activity in the futures market. However, underlying structural pressures remain firmly in place.

Production Surge in Key Suppliers Weighs on Market Sentiment

The fundamental outlook continues to face significant downward pressure from accelerating output across the world’s major sugar-producing regions. India, the world’s second-largest producer, is positioned for a substantial harvest expansion. The India Sugar Mill Association (ISMA) raised its 2025/26 production estimate to 31 MMT from a previous 30 MMT forecast, representing an +18.8% year-over-year increase. Earlier data showed that Indian sugar production jumped +43% y/y to 4.11 MMT in October-November, with 428 sugar mills actively crushing cane by November 30, compared to 376 mills a year prior. Enhanced monsoon rainfall—reporting 937.2 mm as of late September, 8% above the 5-year normal—supports expectations for robust sugarcane yields.

Brazil, the world’s largest producer and driving force behind brazilian sugaring operations, is also ramping production significantly. Conab, Brazil’s official crop forecasting agency, raised its 2025/26 production estimate to 45 MMT from 44.5 MMT in November. Regional data underscores this momentum: Center-South sugar output in mid-November climbed +8.7% y/y to 983 MT, with cumulative season production through November 15 reaching 39.179 MMT, up +2.1% y/y.

Thailand, the world’s third-largest producer and second-largest exporter, is also contributing to global supply growth. The Thai Sugar Millers Corp projects that Thailand’s 2025/26 crop will expand +5% y/y to 10.5 MMT, building on a 2024/25 production increase of +14% y/y to 10.00 MMT.

Market Forecasters Signal Substantial Surplus Ahead

International agencies are unanimously signaling that supply will substantially exceed demand. 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. ISO projects global production will climb +3.2% y/y to 181.8 MMT, while consumption rises only +1.4% to 177.921 MMT.

Sugar trader Czarnikow painted an even more bearish picture, raising its 2025/26 global surplus estimate to 8.7 MMT—an upward revision of +1.2 MMT from its September projection of 7.5 MMT. The USDA similarly projects record output: global 2025/26 production at 189.318 MMT (+4.7% y/y) against consumption of 177.921 MMT (+1.4% y/y), with ending stocks expanding +7.5% y/y to 41.188 MMT.

Export Policy Adjustments Add Complexity

India’s food ministry introduced a moderating factor on November 14, restricting sugar exports in the 2025/26 season to 1.5 MMT—below earlier estimates of 2 MMT. This measure reflects India’s need to rebuild domestic supplies following a -17.5% y/y collapse in 2024/25 production to a 5-year low of 26.1 MMT. Simultaneously, ISMA reduced its ethanol-use estimate to 3.4 MMT from 5 MMT, potentially freeing additional supplies for export.

Near-Term Volatility Likely as Macro Pressures Clash

Friday’s advance highlights the tension between currency-driven technical support and fundamental oversupply conditions. The Brazilian real’s strength temporarily discouraged export sales and supported short-covering, yet the cumulative weight of record harvests across three major producers and record global surplus forecasts creates a structural headwind that near-term rallies are unlikely to overcome sustainably.