Global Sugar Market Faces Slight Recovery as Brazil's Currency Gains Impact Export Dynamics

Sugar markets showed slightly mixed performance in early trading, with New York March contracts edging marginally higher while London white sugar retreated to near 2.5-month lows. The NY market staged a modest recovery from initial weakness as some short-covering emerged, buoyed by the Brazilian real’s appreciation to its strongest level in 20 months. A stronger Brazilian currency typically discourages export activity from the region’s sugar producers, providing temporary support for prices that have faced persistent downward pressure from elevated global production expectations.

The fundamental backdrop for sugar remains challenged by a global production surge that significantly outpaces consumption growth. Multiple forecasting agencies project varying degrees of market imbalance for the 2025/26 season, with differing assessments creating uncertainty across the trading community.

Global Production Forecasts Signal Extended Surplus Conditions

The International Sugar Organization recently outlined expectations for a 1.625 million metric ton surplus in 2025-26, reversing the previous year’s 2.916 million MT deficit. This shift reflects the organization’s projection for a 3.2% year-over-year increase in global sugar production reaching 181.8 million MT. However, other forecasting entities offer more pessimistic outlooks. Covrig Analytics raised its 2025/26 global surplus estimate to 4.7 million MT in late December, while sugar trader Czarnikow boosted its estimate to 8.7 million MT, roughly double the ISO’s projection. These divergent estimates underscore the complexity of global supply chain calculations and the heightened uncertainty surrounding price discovery.

The USDA’s latest bi-annual report projects global 2025/26 production at a record 189.318 million MT, representing a 4.6% year-over-year climb. Human consumption is expected to grow 1.4% year-over-year to 177.921 million MT, leaving production substantially outpacing demand. Global ending stocks are forecasted to decline slightly by 2.9% year-over-year to 41.188 million MT, offering only minimal support given the scale of anticipated surpluses.

Regional Production Expansion Driving Market Pressure

India’s sugar output trajectory represents one of the market’s most significant bullish supply stories. The India Sugar Mill Association reported that cumulative 2025-26 production through mid-January totaled 15.9 million MT, reflecting a robust 22% year-over-year increase. The ISMA raised its full-season 2025/26 production estimate to 31 million MT from a prior forecast of 30 million MT, representing an 18.8% year-over-year expansion. This production surge gains particular significance given India’s position as the world’s second-largest sugar producer and the government’s recent policy shifts toward expanded exports. India’s food ministry approved 1.5 million MT in export authorizations for the 2025/26 season, partially reversing the export quota system implemented in 2022/23.

Brazil, the world’s largest sugar producer, continues supporting elevated supply expectations. Conab, Brazil’s official crop forecasting agency, projects 2025/26 production at 45 million MT, marking another increase from earlier estimates. Unica reported that Brazil’s cumulative Center-South region production through December advanced 0.9% year-over-year to 40.222 million MT, while the percentage of cane diverted to sugar production rose to 50.82% from 48.16% in the prior season. The USDA Foreign Agricultural Service forecasts Brazilian production at a record 44.7 million MT for 2025/26, up 2.3% year-over-year.

Thailand, the world’s third-largest producer and second-largest exporter, adds to the supply pressure. The Thai Sugar Millers Corporation projected 2025/26 production at 10.5 million MT, representing a 5% year-over-year increase. The USDA slightly more conservatively estimates Thai production at 10.25 million MT, still marking a 2% year-over-year gain.

Market Pressures Persist Despite Modest Price Rebounds

The convergence of record production forecasts and policy-driven export liberalization creates a structural headwind for price appreciation. However, near-term technical factors have provided periodic relief. The Brazilian real’s 20-month high presents a temporary check on export aggressiveness from the region, supporting the slightly firmer tone observed in NY contract pricing.

Looking further ahead, supply dynamics may gradually shift more favorably for prices. Safras & Mercado projects that Brazilian sugar production will decline 3.91% year-over-year in 2026/27 to 41.8 million MT from 43.5 million MT expected in 2025/26. Sugar exports from Brazil are similarly anticipated to fall 11% year-over-year to 30 million MT. The Covrig Analytics outlook similarly suggests 2026/27 surplus conditions will tighten substantially to 1.4 million MT from current-season expectations, potentially establishing a more constructive pricing environment as production incentives weaken and grower willingness to expand acreage moderates.

For now, the slightly elevated March prices reflect short-term bargain hunting rather than fundamental supply-demand rebalancing. The scale of anticipated 2025/26 surpluses—even accounting for divergent forecaster estimates—remains sufficient to cap meaningful price appreciation throughout the coming months.