Global Sugar Market Faces Surplus Headwinds as Brazilian Real Strengthens

Market Performance and Currency Impact

Sugar futures experienced a sharp rally on Friday, with March New York sugar (#11, SBH26) advancing +0.25 points or +1.68%, while March London ICE white sugar (#5, SWH26) gained +5.20 points or +1.23%. These moves marked the highest levels in two weeks for NY contracts and one week for London contracts. The underlying catalyst came from the Brazilian real’s appreciation to a 1-week peak against the dollar, which triggered short-covering activity in the sugar pit. A stronger real carries significant implications for Brazil’s sugar producers, as it discourages export competitiveness and incentivizes hedging demand in futures markets.

Supply Growth Reshaping Market Dynamics

The near-term price rally, however, masks a fundamental supply imbalance emerging in 2025-26. Sugar prices had retreated to 3-week lows earlier in the week as production momentum accelerated across major growing regions. The India Sugar Mill Association (ISMA) reported that crushing activity surged, with production from October-November jumping +43% year-over-year to 4.11 million metric tons (MMT). Operational capacity expanded as well, with 428 sugar mills active as of November 30, compared to 376 mills in the prior-year period.

Brazil, the world’s largest sugar producer, is also on track for record output. Conab, the country’s official crop forecaster, raised its 2025-26 production outlook to 45 MMT in early November, up from the previous 44.5 MMT estimate. More recent data from Unica showed that Center-South region sugar production in the first half of November climbed +8.7% year-over-year to 983 thousand metric tons, with cumulative output through mid-November reaching 39.179 MMT, representing a +2.1% year-over-year increase.

The Surplus Question: Conflicting Signals

The International Sugar Organization (ISO) highlighted the demand-supply mismatch most starkly. On November 17, ISO forecast a 1.625 million MT surplus for 2025-26, a dramatic reversal from the 2.916 million MT deficit projected for the current season. This surplus reversal reflects record output from India, Thailand, and Pakistan. Notably, ISO had estimated only a 231,000 MT deficit back in August, showing how quickly the outlook has shifted.

Meanwhile, Czarnikow, a leading sugar trading house, raised its global 2025-26 surplus estimate to 8.7 MMT in November, up from a September projection of 7.5 MMT, implying production growth far exceeding consumption growth. ISO itself forecasts global production climbing +3.2% year-over-year to 181.8 MMT in 2025-26, while global human consumption rises only +1.4% to 177.921 MMT.

India’s Production Surge and Export Implications

India’s trajectory warrants special attention. The country, as the world’s second-largest producer, saw ISMA revise its 2025-26 production estimate upward to 31 MMT on November 11, from an earlier 30 MMT forecast, representing +18.8% year-over-year growth. The June projection from India’s National Federation of Cooperative Sugar Factories was even more bullish, suggesting production could reach 34.9 MMT, a +19% year-over-year climb driven by expanded planted acreage.

This rebound follows a difficult 2024-25 season, when late rains depressed output to just 26.1 MMT, a 5-year low representing a -17.5% year-over-year decline. The recovery is attributed to abundant monsoon rainfall—India’s Meteorological Department reported cumulative rainfall of 937.2 mm as of late September, 8% above normal and the strongest monsoon in five years.

A critical factor is India’s export quota. The government announced on November 14 that mills would be permitted to export 1.5 MMT in 2025-26, below earlier estimates of 2 MMT. This remains significant, as it allows the world’s second-largest producer to compete in international markets despite domestic policy constraints imposed after the 2022-23 supply crisis.

Other Major Producers and Global Forecasts

Thailand, the world’s third-largest sugar producer and second-largest exporter, is also ramping up. The Thai Sugar Millers Corp projected a +5% year-over-year increase to 10.5 MMT in 2025-26, building on 2024-25 output of 10.00 MMT, which itself represented a +14% year-over-year jump.

The USDA’s May 22 report painted the broadest picture: global 2025-26 production is forecast to climb +4.7% year-over-year to a record 189.318 MMT. The USDA’s Foreign Agricultural Service predicted Brazil would contribute 44.7 MMT (up 2.3% year-over-year), India 35.3 MMT (up 25% year-over-year), and Thailand 10.3 MMT (up 2% year-over-year). Global ending stocks are projected to swell +7.5% year-over-year to 41.188 MMT, further underscoring the supply glut.

Brazilian Real and Market Positioning

The strengthening Brazilian real adds complexity to the outlook. While short-term technical factors like currency appreciation can spark tactical rallies in futures markets, the structural reality remains one of ample supply. Brazil, accounting for roughly one-quarter of global sugar production, faces margin pressure if domestic currency strength persists, potentially dampening its export appetite and influencing global price dynamics.

The path forward for sugar prices will depend on whether production forecasts materialize, how export policies evolve—particularly regarding India and Brazil’s trade decisions—and whether demand responds elastically to lower prices. For now, Friday’s rally appears more of a technical bounce than a reversal of the bearish supply outlook defining 2025-26.