Global Sugar Surplus Pressures Prices as Crude Oil Decline Reduces Ethanol Competition

Sugar futures declined sharply on Tuesday amid a broader commodity market selloff, with March NY world sugar #11 (SBH26) dropping 0.13 points (-0.87%) and March London ICE white sugar #5 (SWH26) sliding 3.40 points (-0.80%). While the immediate trigger was a crude oil price collapse—WTI crude (CLF26) hit a 4.75-year low—the deeper bearish pressure stems from a looming global sugar supply glut that threatens to keep prices under pressure for months ahead.

Crude Oil Crash Redirects Cane Production to Sugar

The sharp decline in crude oil prices has immediate implications for the sugar industry. Lower oil prices weaken ethanol economics, prompting the world’s major sugar mills to shift more sugarcane crushing toward sugar production rather than biofuel output. This supply shift threatens to amplify an already oversupplied market. Brazil’s cumulative 2025-26 Center-South sugar output through November rose by 1.1% year-over-year to 39.904 MMT, with the amount of cane crushed for sugar increasing to 51.12% in 2025-26 from 48.34% in 2024-25—a clear signal that mills are prioritizing sugar over ethanol.

Record Production Forecasts Paint Gloomy Picture

The outlook for global sugar production in 2025-26 has turned decidedly bearish. The International Sugar Organization (ISO) forecasted a 1.625 million MT sugar surplus in 2025-26, a dramatic reversal from the 2.916 million MT deficit posted in 2024-25. This represents a sharp shift from ISO’s August forecast of just a 231,000 MT deficit.

ISO projects global sugar production will climb 3.2% year-over-year to 181.8 million MT in 2025-26, while consumption growth lags at much slower pace. Even more bullish estimates come from sugar trader Czarnikow, which boosted its 2025-26 global sugar surplus forecast to 8.7 MMT in early November, up 1.2 MMT from a September estimate of 7.5 MMT.

The USDA painted an even more expansive picture in its May report, forecasting global 2025-26 sugar production at a record 189.318 MMT (+4.7% y/y), with consumption reaching 177.921 MMT (+1.4% y/y). Global sugar ending stocks are projected to climb 7.5% year-over-year to 41.188 MMT—a concerning buildup that pressures prices.

India’s Production Surge Threatens Export Boom

India, the world’s second-largest sugar producer, is emerging as a key driver of the global oversupply narrative. The India Sugar Mill Association (ISMA) raised its 2025-26 India sugar production estimate to 31 MMT from a prior forecast of 30 MMT, representing an 18.8% year-over-year jump. An even more bullish estimate came from India’s National Federation of Cooperative Sugar Factories, which projected 2025-26 production climbing 19% year-over-year to 34.9 MMT, citing expanded planted cane acreage.

This production recovery marks a sharp turnaround from 2024-25, when India’s sugar production declined 17.5% year-over-year to a 5-year low of 26.1 MMT. The early season data underscores this rebound: ISMA reported that Indian sugar production from October 1 to December 15 jumped 28% year-over-year to 7.8 MMT.

Critically, ISMA cut its estimate for sugar diverted to ethanol production in India to 3.4 MMT from a July forecast of 5 MMT, freeing up more sugar for export. India’s food ministry signaled flexibility on the export front, announcing allowance for mills to export 1.5 MMT in the 2025-26 season. While below earlier estimates of 2 MMT, this signals India’s intent to move excess production into global markets, adding downward pressure on prices.

Brazil Maintains Production Momentum

Brazil, the world’s largest sugar producer, continues expanding output. Conab, Brazil’s official crop forecasting agency, raised its 2025-26 Brazil sugar production estimate to 45 MMT from 44.5 MMT in November. Unica, the Brazilian sugar and ethanol producers’ association, reported that Brazil’s cumulative 2025-26 Center-South sugar output through November rose 1.1% year-over-year to 39.904 MMT.

The USDA’s Foreign Agricultural Service (FAS) projected Brazil’s 2025-26 sugar production would rise 2.3% year-over-year to a record 44.7 MMT. Combined with India’s production surge, Brazil’s steady gains are compounding global supply pressures.

Thailand Adds to Global Supply Chain

Thailand, the world’s third-largest sugar producer and second-largest exporter, is also ramping up output. The Thai Sugar Millers Corp projected Thailand’s 2025-26 sugar crop will increase 5% year-over-year to 10.5 MMT. The USDA’s FAS predicted a more modest 2% year-over-year increase to 10.3 MMT. Either way, Thailand’s expanding production adds to the global surplus picture.

Market Takeaway

Sugar prices face a classic supply-demand imbalance, with production forecasts climbing far faster than consumption growth. The crude oil price decline has accelerated this dynamic by making ethanol less competitive, but the underlying driver is record production across major sugar-producing nations. Until global supplies normalize, prices are likely to remain under pressure.