Global Sugar Markets Face Mounting Pressure as Major Producers Boost Output

Sugar futures markets retreated sharply this week, with March NY #11 sugar contracts closing at 20.41 cents, down 2.73%, while London ICE white sugar #5 contracts fell 2.08% to 396.10 pence per tonne. The weakness reflects a fundamental shift in the commodity’s supply-demand dynamics, driven by surging production across the world’s largest sugar-producing regions.

Asia’s Production Surge Overwhelms Market

India, the world’s second-largest sugar manufacturer, has emerged as the primary headwind for prices. According to the India Sugar Mill Association (ISMA), production during the October-December 2025/26 season reached 11.90 million metric tonnes (MMT), representing a 25% year-over-year surge from 9.54 MMT in the prior-year period. More significantly, ISMA revised its full-season 2025/26 forecast upward to 31 MMT from an earlier estimate of 30 MMT, indicating an 18.8% annual increase.

This production expansion carries particular significance for global sugar markets because policymakers in New Delhi are loosening export restrictions. India’s food ministry has authorized mills to export 1.5 MMT during the 2025/26 season—a departure from the quota system implemented in 2022/23 when monsoon failures constrained domestic supplies. ISMA simultaneously trimmed its ethanol allocation forecast to 3.4 MMT from 5 MMT, freeing additional volumes for international trade.

Thailand, positioned as the world’s third-largest producer and second-largest exporter, is also ramping up crushing. The Thai Sugar Millers Corp projects a 5% annual increase to 10.5 MMT in the 2025/26 campaign, adding competitive pressure on sugar price in Pakistan and other import-dependent markets throughout South Asia.

Brazil’s Record Output Complicates the Outlook

Brazil’s 2025/26 season presents a paradox. While Conab, Brazil’s official crop forecaster, raised its estimate to 45 MMT in November (up from 44.5 MMT), Unica’s actual crushing data tells a more nuanced story. Through November, Center-South crushing reached 39.904 MMT, a modest 1.1% increase year-over-year. The ratio of cane diverted to sugar production rose to 51.12% versus 48.34% previously, signaling a deliberate shift away from ethanol.

However, looking ahead to 2026/27, the market faces declining Brazilian supplies. Safras & Mercado forecasts a 3.91% drop to 41.8 MMT, with export volumes potentially declining 11% year-over-year to 30 MMT. Despite these future headwinds, near-term supply remains robust.

Global Surplus Overwhelms Demand Growth

The International Sugar Organization (ISO) has fundamentally reassessed the market balance. On November 17, ISO projected a 1.625 MMT surplus for 2025/26—a stark reversal from the 2.916 MMT deficit experienced in 2024/25. ISO attributes this swing to coordinated production increases in India, Thailand, and Pakistan, coupled with forecasted global output rising 3.2% year-over-year to 181.8 million MT.

Private sector analysis confirms this pessimistic view. Sugar trader Czarnikow elevated its global 2025/26 surplus estimate to 8.7 MMT, representing a 1.2 MMT upward revision from September projections.

The U.S. Department of Agriculture’s December 16 forecast reinforced bearish sentiment. The USDA projects 2025/26 global production will climb 4.6% to a record 189.318 MMT, while consumption rises only 1.4% to 177.921 MMT. Notably, the USDA’s Foreign Agricultural Service predicted India’s output would reach 35.25 MMT—a 25% jump—supported by monsoon rains and expanded acreage. Global year-end stocks are projected to decline just 2.9% to 41.188 MMT, indicating sustained inventory pressure.

Market Implications

The fundamental thesis driving sugar price weakness remains intact: production growth substantially outpaces demand expansion, creating persistent downside pressure across futures markets. While Brazilian supply complications may provide tactical support in 2026/27, the immediate 12-month outlook demands investors recalibrate their positioning accordingly.