Global Sugar Market Under Pressure: Multiple Production Surges Point to Oversupply Ahead

Sugar futures retreated sharply today, with March NY contracts sliding 2.30% and London ICE white sugar #5 dropping 1.61%, as market participants grapple with mounting supply concerns across major producing regions.

India’s Export Expansion Weighs on Prices

At the heart of today’s selloff lies India’s intention to boost sugar exports substantially. The country’s food secretary signaled that the government may permit additional sugar shipments to address a domestic supply surplus, coming after the ministry approved 1.5 MMT of exports for the 2025/26 season. This marks a significant policy shift from the export quota system introduced in 2022/23 when late monsoon rains had constrained domestic availability.

The timing proves critical: preliminary data from October 1 to December 15 showed India’s sugar output jumped 28% year-over-year to 7.83 MMT. The India Sugar Mill Association (ISMA) subsequently raised its full-season 2025/26 forecast to 31 MMT from 30 MMT previously—an 18.8% increase annually. More dramatically, ISMA reduced its ethanol production estimate to 3.4 MMT from 5 MMT, freeing up additional supply for export channels.

Other forecasters paint an even more bullish production picture. The National Federation of Cooperative Sugar Factories projects India’s 2025/26 output could reach 34.9 MMT, representing a 19% year-over-year climb as farmers expand planted acreage, particularly as retreating monsoon patterns stabilize. This recovery follows a sharp 17.5% contraction in 2024/25 production to 26.1 MMT—a five-year nadir.

Brazil’s Record Crop Emerges as Structural Headwind

Brazil’s trajectory compounds the oversupply narrative. Conab raised its 2025/26 production estimate to 45 MMT from 44.5 MMT, while Unica reported cumulative Center-South output through November reached 39.904 MMT, up 1.1% annually. Notably, the proportion of cane diverted to sugar production climbed to 51.12% in 2025/26 versus 48.34% prior year—a structural shift indicating stronger sugar focus.

Currency dynamics amplify export incentives: the Brazilian real hit 4.5-month lows against the dollar, encouraging aggressive export sales from regional mills.

Thailand’s Third Pillar of Production

Thailand, the world’s third-largest producer and second-largest exporter, projects its 2025/26 crop will expand 5% to 10.5 MMT, adding another layer of global supply pressure.

Demand-Supply Imbalance Widens Dramatically

International organizations have sharply revised their outlooks toward surplus. The International Sugar Organization (ISO) now forecasts a 1.625 million MT surplus in 2025-26—a complete reversal from August’s prediction of a 231,000 MT deficit—following a 2.916 million MT shortfall in 2024-25. Importantly, ISO attributes the swing to surging production across India, Thailand, and Pakistan.

The trade community echoes this concern: Czarnikow raised its 2025/26 global surplus estimate to 8.7 MMT in November, up 1.2 MMT from September’s projection.

USDA Confirms Record Production Trajectory

The USDA’s latest bi-annual assessment underscores structural oversupply. Global 2025/26 sugar production is projected at a record 189.318 MMT—up 4.6% annually—while consumption reaches 177.921 MMT. This production-consumption gap will leave ending stocks at 41.188 MMT, down only 2.9% despite the surplus generation.

The USDA’s Foreign Agricultural Service specifically highlighted Brazil’s 2025/26 output at record 44.7 MMT (+2.3% y/y), India’s production at 35.25 MMT (+25% y/y reflecting favorable monsoon conditions), and Thailand’s 10.25 MMT (+2% y/y).

Market Implications

Sugar’s price weakness reflects rational pricing of a materially oversupplied market. With multiple forecasters pointing to surpluses ranging from 1.6 to 8.7 MMT, further downside pressure appears likely absent any major supply disruptions or demand acceleration.