Global Sugar Supply Surge Pressures Prices as Market Consolidates

Sugar futures showed mixed signals this week as the commodity consolidated recent gains. March NY sugar futures edged up 5 points (+0.34%), while March London ICE white sugar added 2.50 points (+0.60%), though prices remain well below the 3.5-week highs established on Wednesday. Short covering activity provided some support before the weekend, but the underlying market tone reflects growing concerns about oversupply in the 2025-26 season.

Supply Expansion Weighs Heavily on Sugar Shares

The primary pressure on sugar prices stems from dramatically higher production forecasts from major producing regions. Brazil, the world’s largest sugar producer, continues ramping up output, with Conab raising its 2025/26 production estimate to 45 MMT from 44.5 MMT previously. Unica’s recent data showed Brazil’s Center-South region crushed 2.068 MMT of sugar in October’s second half, representing a +16.4% year-over-year increase. Through October, cumulative Center-South output reached 38.085 MMT, up +1.6% compared to the same period last year, signaling robust production momentum heading into the new season.

India’s sugar production picture has shifted dramatically upward. The India Sugar Mill Association raised its 2025/26 estimate to 31 MMT from 30 MMT, representing +18.8% annual growth. This recovery follows the previous year’s significant decline to 26.1 MMT. More expansive forecasts project India could reach 34.9-35.3 MMT, driven by abundant monsoon rainfall that measured 937.2 mm as of September 30—8% above normal and the strongest five-year rainfall pattern. Thailand, the world’s third-largest producer, is also expanding output, with projections of 10.5 MMT for 2025/26, a +5% increase year-over-year.

Surplus Outlook Intensifies Market Headwinds

The confluence of higher production across multiple continents is creating a supply surplus scenario. The International Sugar Organization forecasts a 1.625 million MT surplus for 2025-26, a dramatic reversal from the prior year’s 2.916 million MT deficit. Even more bearish, sugar trader Czarnikow elevated its global 2025/26 surplus estimate to 8.7 MMT in November, raising it +1.2 MMT from September projections. The USDA’s bi-annual forecast suggests global production will climb +4.7% to a record 189.318 MMT while global ending stocks increase +7.5% to 41.188 MMT.

These supply dynamics overshadowed demand growth, which the USDA pegged at +1.4% to 177.921 MMT, leaving ample excess supplies in the market.

Stabilizing Factors Provide Limited Support

Several developments offered temporary price support. India’s food ministry announcement regarding ethanol-blended gasoline encouraged discussion of shifting more sugarcane crushing toward ethanol production, potentially reducing sugar supplies. Additionally, India limited sugar exports to 1.5 MMT for 2025/26—below the earlier 2 MMT expectation—providing some relief to the global supply picture.

However, weakness in the Brazilian real, which touched a 5-week low versus the dollar, incentivizes higher export volumes from Brazil’s producers, counteracting restrictive measures elsewhere. The currency depreciation typically encourages larger sales by commodity exporters seeking to maximize revenues in their local currency terms.

Market Consolidation Amid Structural Headwinds

Sugar’s inability to sustain recent highs reflects the market’s acknowledgment of structural oversupply. London sugar touched a 4.75-year low in late trading, and NY sugar declined to a 5-year nearest-futures low, capturing the extended bear move that has characterized the past month. The downside pressure remains intact as long as production forecasts remain at elevated levels and no demand-side surprises emerge to absorb additional supplies.

Sugar shares and broader commodity equity exposure appear vulnerable to sustained downside until the supply-demand balance tilts more favorably for prices.