Global Sugar Market Faces Supply-Demand Imbalance as Production Expectations Climb

Sugar prices staged a recovery today, with March NY sugar futures (#11) gaining +0.20 cents (+1.35%) and London ICE white sugar (#5) rising +2.40 cents (+0.56%), rebounding from recent weakness. The rally was driven by year-end short covering by funds, though the broader mercado sentiment remains mixed as a stronger dollar initially pressured commodities across the board.

India’s Output Boom Reshapes Supply Outlook

The most significant headwind for prices comes from India, the world’s second-largest producer, where production estimates keep climbing. The India Sugar Mill Association (ISMA) raised its 2025/26 forecast to 31 MMT in November, up from 30 MMT previously—a +18.8% year-over-year jump. More striking, India’s October-December crushing reached 11.83 MMT, surging +24% y/y, signaling the strongest start to a crushing season in years.

This production surge is enabling India to pivot toward exports. The government recently signaled permission for additional sugar shipments to relieve domestic stockpiles, building on the 1.5 MMT quota already approved for the 2025/26 season. The ISMA also reduced its ethanol diversion forecast from 5 MMT to 3.4 MMT, further freeing up supplies for export. This supply reorientation is weighing heavily on global prices.

Brazil’s Record Crop Offsets Decline Expectations

While consulting firm Safras & Mercado projected a -3.91% decline in Brazil’s 2026/27 production to 41.8 MMT, the near-term picture tells a different story. For 2025/26, Brazil is set to produce a record 44.7 MMT according to USDA forecasts, with cumulative Center-South output through November already reaching 39.904 MMT (+1.1% y/y). Crucially, millers have shifted their crush mix, dedicating 51.12% of cane to sugar rather than ethanol, compared to 48.34% in the prior year.

This reallocation underscores how rising sugar prices remain competitive relative to biofuel alternatives, but the sheer volume being directed toward sugar output is bearish for the price mercado.

Global Surplus Widens—Multiple Forecasters Agree

The International Sugar Organization (ISO) expects a 1.625 million MT surplus in 2025-26, reversing the 2.916 million MT deficit from 2024-25. The USDA projects even broader expansion, forecasting global production climbing +4.6% y/y to a record 189.318 MMT, while consumption grows at a more modest +1.4% to 177.921 MMT.

Sugar trader Czarnikow takes an even more bearish view, estimating a 8.7 MMT global surplus for 2025/26—up 1.2 MMT from its September forecast. This widening surplus consensus signals sustained downside pressure on prices absent demand shocks.

Thailand Adds to Supply Pressure

Thailand, the world’s third-largest producer and second-largest exporter, is projected to boost output by +5% y/y to 10.5 MMT in 2025/26. The USDA pegs a slightly more conservative +2% increase to 10.25 MMT. Either way, Thailand’s rising production contributes to a globally saturated mercado.

The Demand-Supply Equation Tilts Bearish

With global 2025/26 ending stocks forecast to decline just -2.9% y/y to 41.188 MMT despite record production, the sugar sector faces a structural challenge: supply growth is outpacing consumption growth, leaving little room for price support. Until demand accelerates meaningfully or major producers face weather disruptions, sugar prices are likely to remain under pressure despite near-term technical rallies driven by fund unwinding.