Global Sugar Market Faces Shifting Dynamics as Production Outlook Transforms

Sugar futures bounced back today with mixed signals across major exchanges. March NY sugar climbed +0.02 (+0.14%), while London ICE white sugar #5 advanced +1.90 (+0.45%). The rebound was fueled by appreciation in the Brazilian real against the dollar, which prompted short covering among traders and temporarily discouraged export interest from major producers.

Production Surge Creates Headwinds

The global sugar market is bracing for a structural shift in the coming season. The USDA’s December report forecasts global 2025/26 sugar production climbing 4.6% year-over-year to a record 189.318 million metric tons, while consumption growth lags at just 1.4% to 177.921 MMT. This production-consumption mismatch is reshaping expectations across the sector.

India’s output expansion is particularly notable. The India Sugar Mill Association reported Q3 2025-26 production surged 25% to 11.90 MMT, and raised its full-year forecast to 31 MMT (up 18.8% y/y). The USDA’s Foreign Agricultural Service projects even higher at 35.25 MMT for 2025/26. Critically, India reduced its ethanol allocation estimate to 3.4 MMT from 5 MMT previously, freeing up supply for exports. India’s government has signaled openness to additional sugar exports beyond the approved 1.5 MMT quota for 2025/26, as domestic gluts build.

Brazil, traditionally the swing producer, is also tracking higher. While Safras & Mercado predicts a slight decline in 2026/27 production to 41.8 MMT, current forecasts remain robust. Conab projects Brazil’s 2025/26 output at 45 MMT, and through November, Center-South cumulative production hit 39.904 MMT (+1.1% y/y), with the crushing ratio for sugar rising to 51.12% from 48.34% the prior year.

Thailand, the world’s third-largest producer, is expected to expand output by 5% to 10.5 MMT in 2025/26, adding additional pressure to prices.

The Surplus Question

These supply gains have spawned conflicting surplus estimates. The International Sugar Organization forecasts a 1.625 million MT surplus for 2025-26, marking a sharp swing from the prior year’s 2.916 million MT deficit. The ISO attributes this shift to increased production in India, Thailand, and Pakistan, with global output rising 3.2% year-over-year.

Sugar trader Czarnikow takes a more bearish stance, estimating a 8.7 MMT global surplus for 2025/26, up from 7.5 MMT projected in September—underscoring growing downside risk to prices.

What This Means for the Sugar Market

Global ending stocks are projected to decline 2.9% to 41.188 MMT, suggesting some inventory normalization, but the relentless production increases and export readiness from major suppliers point to sustained pressure on sugar prices in the sugar market. The near-term bounce in NY and London contracts appears tactical rather than reflective of any structural bullish shift, as the fundamental backdrop remains weighted toward oversupply concerns.