Global Sugar Market Faces Headwinds: Dollar Surge and Output Boom Pressure Prices

Sugar futures logged losses today as currency movements and supply fundamentals collided in the market. New York March contracts (SBH26) declined 0.05 points (-0.33%), while London ICE white sugar #5 (SWH26) dropped 1.20 points (-0.28%). The primary culprit: a firmer dollar index (DXY00) that reached its highest level in four weeks, creating additional drag on commodity valuations across the board.

Dollar Strength vs. Index Rebalancing: A Mixed Picture

The strengthening greenback typically pressures agricultural commodities like sugar, yet losses remain contained. Citigroup’s analysis points to a counterweight: anticipated index-related inflows for commodity benchmark rebalancing. The two dominant indexes—BCOM and S&P GSCI—are projected to receive approximately $1.2 billion in sugar futures over the coming seven days, providing some price support amid broader dollar momentum.

Brazil’s Production Outlook: Quality Over Quantity Concerns

Recent developments in Brazil, the world’s largest sugar producer, have shifted expectations. Last week, NY sugar approached a 2.5-month peak on optimism around tighter future supplies. However, this optimism now faces scrutiny. Safras & Mercado, a leading consulting firm, reported on December 23 that Brazil’s 2026/27 sugar crop will contract by 3.91% to 41.8 MMT from the 43.5 MMT anticipated for 2025/26. More significantly, the firm projects sugar exports will slide 11% year-over-year to 30 MMT—a material reduction that could support prices if other regions don’t offset the decline.

Conversely, Conab’s more recent December data paints a rosier picture for 2025/26, having raised its forecast to 45 MMT from 44.5 MMT in November. Unica corroborated this strength, noting that Center-South crushing through November rose 1.1% year-over-year to 39.904 MMT. The proportion of cane directed toward sugar production (rather than ethanol) ticked up to 51.12% from 48.34% the previous year, suggesting continued robust output in the near term.

India Surge: Export Expansion Threatens Cost of Sugar Stability

India’s sugar market took center stage after Friday’s weakness, driven by surging domestic production. The India Sugar Mill Association reported that October-December production jumped 25% year-over-year to 11.90 MMT—a sharp acceleration from 9.54 MMT in the same 2024 period. Full-year 2025/26 production was revised upward to 31 MMT from the prior 30 MMT estimate, reflecting an 18.8% year-over-year increase.

This expansion carries critical implications for global availability. India’s food ministry signaled in November that additional sugar exports beyond the 1.5 MMT permitted quota may be authorized to relieve domestic supply pressures. The ISMA simultaneously reduced its ethanol diversion estimate from 5 MMT to 3.4 MMT, freeing inventory for international sales. As the world’s second-largest producer, India’s export decisions ripple through cost of sugar trends globally.

Thailand and Emerging Surplus Concerns

Thailand’s production outlook compounds supply concerns. The Thai Sugar Millers Corp projects a 5% increase to 10.5 MMT for 2025/26, with the nation’s status as the world’s third-largest producer and second-largest exporter amplifying market impact.

The International Sugar Organization’s November assessment revealed the structural challenge ahead: a 1.625 million MT surplus in 2025/26, reversing the 2.916 million MT deficit in 2024/25. ISO attributes this reversal to production gains in India, Thailand, and Pakistan, forecasting a 3.2% year-over-year rise in global output to 181.8 million MT. Sugar trader Czarnikow went further, raising its global surplus projection to 8.7 MMT (versus 7.5 MMT previously), suggesting even greater oversupply risks.

USDA’s Long-Term Framework: Record Production Meets Rising Consumption

The USDA’s December 16 biannual assessment set the stage for 2025/26: global sugar production is forecast to climb 4.6% year-over-year to an all-time high of 189.318 MMT. Consumption is expected to grow more modestly at 1.4% to 177.921 MMT, leaving ample supply cushion. Global ending stocks are projected to decline 2.9% to 41.188 MMT—a reduction that reflects the sheer scale of production increases.

By region, the USDA Foreign Agricultural Service forecasts Brazil at 44.7 MMT (+2.3% y/y), India at 35.25 MMT (+25% y/y driven by monsoon benefits and acreage expansion), and Thailand at 10.25 MMT (+2% y/y). Together, these projections underscore the supply-driven pressure weighing on near-term pricing and the overall cost of sugar trajectory.

The combination of dollar strength, record projected production, and shifting export policies suggests price support will remain contested, with supply fundamentals ultimately determining whether recent losses extend further.