Sugar prices have faced a notable decline, reflecting market concerns over an anticipated increase in global supplies. As of July, the price for New York’s world sugar #11 (SBN25) has decreased by 0.16 cents, or 0.96%, while the August London ICE white sugar #5 (SWQ25) has fallen by 4.90 cents, translating to a 1.04% drop. This reversal comes on the heels of early gains spurred by rising crude oil prices and a strengthening Brazilian real. Covrig Analytics has revised its global sugar surplus estimate for the 2025-2026 crop year to 4.2 million metric tons, slightly up from April’s forecast of 4.1 million metric tons.
Initially, sugar prices appeared to move upward, buoyed by developments in the oil market. West Texas Intermediate (WTI) crude oil has recently risen to a two-and-a-half-month high, increasing the attractiveness of ethanol production—a common alternative for sugar cane processing. With sugar mills contemplating a shift towards greater ethanol production in response to these rising oil prices, expectations for reduced sugar supplies loom large over the market.
Adding to this complexity, the Brazilian real has also appreciated, reaching an eight-month high. This rise tends to disincentivize sugar exports from Brazilian producers, as their margins diminish when converting earnings into local currency. The decline in sugar prices is particularly notable as it comes on the back of a downward trend that has persisted for two months, during which time New York sugar reached a four-year low in nearest futures, while London sugar hit a three-and-three-quarter-year low.
Market expectations surrounding global sugar supplies are casting a long shadow over prices. The U.S. Department of Agriculture (USDA), in its biannual report released on May 22, projected an increase in global sugar production of 4.7% year-over-year for the 2025-2026 season, reaching a record 189.318 million metric tons. This increase could lead to a substantial global sugar surplus of 41.188 million metric tons, which marks a 7.5% rise compared to the previous year.
India, the world’s second-largest sugar producer, plays a crucial role in the global sugar supply landscape. Reports from the National Federation of Cooperative Sugar Factories in India indicate expectations of a staggering 19% year-over-year increase in sugar production for the 2025-2026 season, arriving at 35 million metric tons. Larger planted areas and favorable weather conditions, particularly abundant rainfall predicted for this year, may contribute to a particularly successful crop. The Indian government anticipates that this monsoon season will yield rainfall at around 105% of the long-term average.
Further complicating the outlook, the Indian government has indicated a potential for sugar exports to resume. Earlier in the year, it announced that sugar mills would be permitted to export 1 million metric tons this season, easing the strict export restrictions that had been in place since October 2023 to ensure adequate domestic supply. In previous years, India had curbed exports to limit domestic supply pressures, permitting only 6.1 million metric tons of sugar to be exported in the 2022-2023 season, down significantly from a record 11.1 million metric tons the year before.
Despite these reductions, analysts flag decreasing projections for India’s 2024-2025 sugar output. The Indian Sugar Mills Association (ISMA) recently reported that India’s sugar production from October 2022 to May 2023 stood at 25.74 million metric tons, reflecting a 17% decrease compared to the same timeframe last year, hinting at potential supply tightness in the near term. Moreover, projected exports for the following season have been revised downward, with food secretary Rohit Chopra indicating that total exports might only reach 800,000 metric tons.
In Thailand, another significant player in the global sugar market, projections for increased sugar production have also emerged. The Office of the Cane and Sugar Board reported anticipations of a 14% year-over-year increase in sugar production for the 2024-2025 crop year, up to 10 million metric tons. Being the third-largest sugar producer globally and the second-largest exporter, Thailand’s burgeoning production may further exert downward pressure on global sugar prices.
Yet, reductions in production output from Brazil, the world’s largest sugar producer, provide a counterbalance to the bearish sentiment present in other market segments. Reports from Unica, a prominent sugar industry association in Brazil, indicated that sugar production in the country’s Center-South region fell 6.8% year-over-year in early May, with cumulative production down 22.7% compared to the previous year. A report from Brazil’s National Supply Company, Conab, reinforced this perspective, projecting a 3.4% decrease in Brazil’s sugar output for the 2024-2025 season to approximately 44.118 million metric tons. This decline is linked to recent drought conditions and excessive heat that have compromised sugarcane yields, contributing to losses estimated at as much as 5 million metric tons due to crop damage from wildfires in the key sugar-producing state of São Paulo.
The International Sugar Organization (ISO) has responded to these shifting dynamics, adjusting its forecasts upwards for the global sugar deficit in the 2024-2025 crop year to a nine-year high of 5.47 million metric tons, compared with an earlier estimate of 4.88 million metric tons. This revision reflects the market’s evolving landscape, characterized by ongoing fluctuations in output and consumption rates.
The USDA’s recent report further underscores these trends, projecting that human sugar consumption will increase by 1.4% year-over-year to a record 177.921 million metric tons in the 2025-2026 season, while also expecting global ending stocks to rise by 7.5% to 41.188 million metric tons. As these projections crystallize, stakeholders in the sugar industry must navigate a complex interplay of local and global market forces, shaped by varying production forecasts and economic conditions.
The potential for price volatility persists, influenced by an array of factors including international demand shifts, climatic changes, and geopolitical developments. While the near-term outlook remains fraught with challenges, the market’s adaptive nature and the continuous evolution of production practices may offer pathways forward in managing supply constraints and consumer needs.
As professionals and analysts monitor these developments, insights gleaned from both emerging data and historical trends will be pivotal in informing future strategies and investment decisions within the sugar industry. The ongoing adjustments in forecasts and market sentiment encapsulate the intricacies of agricultural commodities, laying the groundwork for future market dynamics in this crucial sector.