Sugar prices experienced a notable decline on Tuesday, as both the July New York world sugar #11 and the August London ICE white sugar #5 contracts fell sharply. The New York sugar fell 1.14% to close at $0.1658 per pound, while London white sugar dropped by 0.97%, closing at $4.689 per metric ton. This downturn follows a period of early gains driven by strength in crude oil and the Brazilian real, only to be tempered by forecasts of robust global sugar supplies.
Covrig Analytics revised its global sugar surplus estimate for 2025/26 upward, setting it at 4.2 million metric tons (MMT), an increase from its earlier April forecast of 4.1 MMT. Such adjustments have significant implications for market dynamics, influencing price volatility amid changing supply and demand conditions.
The initial support for sugar prices on Tuesday stemmed from rising crude oil prices and a strengthening Brazilian real. West Texas Intermediate (WTI) crude achieved a two-and-a-half-month high, which traditionally boosts ethanol prices. This scenario may lead sugar mills worldwide to allocate a greater share of sugarcane to ethanol production rather than sugar, thus squeezing sugar supplies. Additionally, the Brazilian real reached an eight-month high, making Brazilian sugar exports less attractive due to higher domestic prices, thereby disincentivizing sellers from entering international markets.
The current trends suggest a prolonged period of downward movement for sugar prices. The New York sugar market has now seen a two-month decline, recently touching a four-year low in the nearest futures, while London sugar prices have also fallen to a three-and-three-quarter-year low. Analysts point to projections of a global sugar surplus as a key factor in this decline.
The U.S. Department of Agriculture (USDA) provided sobering estimates in its biannual report, released May 22, indicating that global sugar production would rise by 4.7% year-over-year to a record 189.318 million metric tons, leading to a surplus of 41.188 MMT, up 7.5% from the previous year. This anticipated increase is primarily attributed to optimistic projections for sugar production in major producing countries, including Brazil and India.
In India, the world’s second-largest sugar producer, the National Federation of Cooperative Sugar Factories recently declared an expected 19% year-over-year increase in sugar production, forecasting output to reach 35 million tons. Factors contributing to this bullish outlook include a significant expansion in planted cane acreage and favorable weather conditions, with predictions of above-normal monsoon rains set to nurture a bumper crop.
India’s Ministry of Earth Sciences has projected monsoon rainfall to be 105% of the long-term average, with the season running from June through September. This climatic forecast further complicates the sugar market, as abundant rainfall typically leads to increased cultivation and, consequently, higher output. Such robust production profiles from major producers create bearish pressure on global sugar prices.
Simultaneously, data released by the USDA’s Foreign Agricultural Service (FAS) indicates that Brazil’s sugar production for 2025/26 is set to rise by 2.3% year-on-year to a record 44.7 million metric tons. This anticipated increase is further exacerbated by projections from the government and industry analysts pointing towards higher production levels in Thailand, where output is likely to climb by 2% to reach 10.3 million metric tons.
In contrast, recent developments in India regarding export policies have introduced a complex dynamic to the market. The Indian government has permitted sugar mills to export 1 million tons of sugar this season, easing the previous restrictions imposed in 2023. These limitations were instituted to preserve adequate domestic stocks, reflecting a careful balancing act amidst seasonal fluctuations and global supply pressures. The previous year saw India export only 6.1 million tons, significantly lower than the 11.1 million tons exported in the preceding season.
Despite the optimistic outlook for sugar production, some cautionary notes are emerging. The Indian Sugar Mills Association (ISMA) has projected a decline in sugar production by 17.5% in the 2024/25 season, forecasting a drop to a five-year low of 26.2 million metric tons. Reports indicate that production from October 1 to May 15 has fallen 17% compared to the same period last year, reflecting early harvest difficulties.
Food officials in India have also tempered expectations, suggesting that sugar exports could total only 800,000 tons for the 2024/25 season, down from previous estimates. Such projections indicate a potential shift in the balance between domestic needs and export capabilities, impacting global markets.
Further underscoring the complexity of the sugar market, data from Thailand indicates a robust increase in production figures, with forecasts pointing to a 14% rise for the 2024/25 season. As the world’s third-largest sugar producer and second-largest exporter, Thailand’s anticipated output might intensify competition in international markets, further exerting downward pressure on prices.
Conversely, recent reports suggest that reduced sugar production in Brazil could potentially stabilize or even support prices in the short term. A recent analysis from Unica reported that Brazil’s Center-South sugar production for early May fell by 6.8% year-on-year, which could reflect production challenges arising from adverse weather conditions.
The International Sugar Organization (ISO) has also adjusted its projections, raising its forecast for the 2024/25 global sugar deficit to a nine-year high of 5.47 million tons. This revision, up from prior estimates, indicates the market may tighten following the previous year’s surplus. Moreover, a reduction in Brazil’s sugar production estimates to 44.118 million tons for the 2024/25 season, down 3.4% year-over-year, can be attributed to poor yields tied to drought and excessive heat that resulted in crop damage.
Overall, the interplay of these factors reveals a complex and evolving landscape for the global sugar market. The USDA asserts that global sugar consumption is also on the rise, with projections for 2025/26 forecasting a year-over-year increase of 1.4% to a record 177.921 million metric tons. Coupled with an expected rise in global sugar ending stocks of 7.5% year-over-year to 41.188 million metric tons, these trends indicate a situation laden with uncertainty.
As stakeholders across the agriculture and investment sectors navigate this fluctuating environment, the balance of supply and demand will continue to shape the future trajectory of sugar prices. Understanding these dynamics will be crucial for producers, traders, and policymakers alike as they prepare to address the challenges emerging from changing climatic conditions, regulatory shifts, and evolving market demand.