Global Sugar Markets Rally as Brazilian Currency Surge Triggers Rebalancing

Sugar traders faced a mixed but upward-trending session today, with March New York world sugar #11 futures climbing 0.14 cents (+0.95%) and March London ICE white sugar #5 gaining 1.10 points (+0.27%). Behind this measured advance lies a more significant catalyst: the Brazilian real has surged to a 20-month high, triggering short-covering activity that’s temporarily supporting prices even as structural fundamentals suggest longer-term headwinds ahead.

The Brazilian Real Effect: Currency Strength Pressures Export Economics

The stronger Brazilian real creates a paradoxical headwind for sugar producers in the world’s largest producing nation. When Brazil’s currency appreciates against the US dollar, it makes Brazilian sugar exports less competitively priced in global markets, discouraging sellers from aggressively pushing volumes. This dynamic has sparked buying pressure from traders with short positions seeking to cover losses—a classic market reaction that temporarily bolsters prices.

However, Brazil’s record production trajectory undermines this brief reprieve. According to data from Unica, Brazil’s cumulative Center-South sugar output for 2025-26 through December reached 40.222 million metric tons (MMT), representing a 0.9% year-over-year increase. More significantly, sugar producers are allocating an increased share of their sugarcane crush toward sugar production: the proportion rose to 50.82% in 2025-26 compared to 48.16% in the prior year. Conab, Brazil’s official crop forecasting agency, has raised its 2025-26 production estimate to 45 MMT, with projections suggesting output will remain elevated through the current season.

India’s Production Surge and Export Expansion: The Global Supply Wild Card

India’s sugar sector is experiencing exceptional growth that’s beginning to reshape global trade flows. The India Sugar Mill Association (ISMA) reported that India’s cumulative production from October 1 through mid-January reached 15.9 MMT, up 22% year-over-year. ISMA subsequently raised its full-season 2025-26 estimate to 31 MMT from an earlier forecast of 30 MMT—an increase of 18.8% year-over-year.

The ISMA revision includes an important supply-side adjustment: the association cut its estimate for sugar diverted to ethanol production from 5 MMT to 3.4 MMT. This reduction frees additional supply for export markets, potentially amplifying India’s role in global trade. The Indian government has signaled receptiveness to expanded shipments, with the food ministry approving 1.5 MMT in export quota for 2025-26, a deliberate move to manage what officials describe as a domestic supply glut. This policy shift matters considerably: India remains the world’s second-largest producer, and increased exports would inject substantial additional volume into already-pressured global markets.

Global Supply Dynamics Dominate Price Fundamentals

The outlook for global sugar supplies has decisively shifted toward oversupply, with multiple forecasters revising their expectations upward. Covrig Analytics raised its 2025-26 global surplus estimate to 4.7 MMT in December from 4.1 MMT estimated just two months earlier. The International Sugar Organization forecast a 1.625 MMT surplus in 2025-26 following a 2.916 MMT deficit in the prior year—a significant swing driven by production increases in India, Thailand, and Pakistan. ISO’s modeling suggests global production will rise 3.2% year-over-year to 181.8 MMT, while sugar trader Czarnikow raised its surplus estimate to 8.7 MMT.

This persistent surplus dynamic weighs directly on prices. Structural oversupply encourages farmers and processors to maximize production volumes rather than supporting prices through supply restraint. Thailand’s sugar output is expected to expand 5% year-over-year to 10.5 MMT according to the Thai Sugar Millers Corp, with Thailand serving as the world’s third-largest producer and second-largest exporter. These additional volumes, combined with India’s surge and Brazil’s record output, create a challenging environment for price stability.

Looking Ahead: USDA Projections and Market Implications

The US Department of Agriculture provided the most comprehensive forward guidance in its December 16 report. The USDA projects that global 2025-26 sugar production will reach a record 189.318 MMT, up 4.6% year-over-year, while human consumption is forecast to increase only 1.4% to 177.921 MMT. Global ending stocks will decline 2.9% to 41.188 MMT, primarily reflecting the demand-supply imbalance.

The USDA’s Foreign Agricultural Service offered country-specific outlooks: Brazil’s production is expected to reach a record 44.7 MMT (+2.3% year-over-year), India’s output will climb 25% to 35.25 MMT supported by favorable monsoon conditions and expanded acreage, and Thailand’s harvest will increase 2% to 10.25 MMT. These projections align with broader market expectations of a persistently oversupplied landscape.

Beyond 2025-26, medium-term supply prospects may provide some eventual relief. Safras & Mercado consulting firm warned that Brazil’s sugar production will contract 3.91% to 41.8 MMT in 2026-27 from the expected 43.5 MMT in 2025-26. Brazilian exports are similarly forecast to decline 11% year-over-year to 30 MMT in the subsequent season. Covrig Analytics projects that the global surplus will narrow substantially to just 1.4 MMT in 2026-27, suggesting that weak current prices could eventually discourage production expansion and rebalance supplies.

For investors monitoring commodity markets through platforms like Barchart’s sugar analysis tools, the current environment illustrates a classic tension between near-term technical factors (the Brazilian currency rally and short covering) and overwhelming fundamental pressures (record global supplies and rising exports). Until the supply cycle turns, sugar prices face structural resistance from a persistently oversupplied global market.