Global Sugar Market Faces Growing Headwinds as Production Forecasts Reach New Highs

Sugar traders are grappling with mounting supply pressures as multiple forecasting agencies have significantly raised their production estimates for the 2025-26 season. The combination of expanding output from major producers and weakening crude oil markets has created challenging conditions for price stability in recent sessions.

Energy Markets Trigger Immediate Price Weakness

Crude oil’s sharp decline to a 4.75-year low has emerged as an immediate headwind for sugar valuations. As WTI crude prices deteriorated, the underlying economic case for ethanol production has weakened substantially. This shift in energy economics is prompting sugar mills globally to recalibrate their cane crushing priorities, redirecting output away from ethanol processing and toward direct sugar production. March NY world sugar #11 (SBH26) declined 0.03 points (-0.20%) while March London ICE white sugar #5 (SWH26) fell 1.40 points (-0.33%), reflecting investor concerns about this margin compression.

India’s Sugar Boom Reshapes Global Supply Dynamics

The most significant bearish development stems from India’s dramatically improved crop outlook. The India Sugar Mill Association (ISMA) released projections indicating the 2025/26 season could deliver record production, with recent estimates climbing to 31 MMT, representing an 18.8% year-over-year increase from the previous season’s 26.1 MMT low. The National Federation of Cooperative Sugar Factories pushed projections even higher to 34.9 MMT, citing expanded planted acreage across the region.

This production surge carries important implications for global trade flows. ISMA revised downward its estimate for ethanol-destined sugar to just 3.4 MMT from a previous July forecast of 5 MMT, suggesting more material available for export markets. India’s government allocation of 1.5 MMT export quota for the season—reduced from earlier 2 MMT expectations—underscores the tension between domestic supply growth and managed export release. During October 1-December 15, Indian mills already crushed enough cane to produce 7.8 MMT of sugar, a 28% year-over-year jump that signaled the production trajectory early.

Brazil’s Record Output Reinforces Supply Concerns

Brazil’s continued expansion adds another layer of downside pressure to the price equation. Conab, Brazil’s official forecasting agency, raised its 2025/26 production estimate to 45 MMT in November, up from a prior forecast of 44.5 MMT. Unica’s tracking through November showed Center-South region cumulative output reached 39.904 MMT, posting a 1.1% year-over-year gain. Notably, sugar’s share of cane crushing rose to 51.12% in the 2025/26 campaign from 48.34% in 2024/25, indicating mills are actively shifting processing allocation away from ethanol.

Thailand’s Expansion and the Broader Surplus Picture

Thailand, positioned as the world’s third-largest producer and second-largest exporter, is also increasing capacity. The Thai Sugar Millers Corp projected a 5% year-over-year rise to 10.5 MMT for 2025/26, contributing to the tightening global balance.

The International Sugar Organization (ISO) released projections on November 17 forecasting a 1.625 million MT surplus for 2025-26, a dramatic reversal from the 2.916 million MT deficit recorded in 2024-25. This represents a substantial shift from ISO’s August forecast of a 231,000 MT deficit for the same period. The organization attributes the swing to accelerating production in India, Thailand, and Pakistan, alongside the previously elevated Brazilian output. ISO is modeling global sugar production rising 3.2% year-over-year to 181.8 million MT.

Sugar trader Czarnikow pushed its global surplus estimate even higher, forecasting 8.7 MMT for 2025/26, an increase of 1.2 MMT from September’s 7.5 MMT projection, suggesting market participants are increasingly convinced of material oversupply scenarios.

Official Projections Highlight Record Production Capacity

The USDA’s Foreign Agricultural Service (FAS) painted an equally bullish picture for global production when releasing its May 22 bi-annual assessment. FAS modeled global 2025/26 production climbing 4.7% year-over-year to a record 189.318 MMT against anticipated consumption growth of just 1.4% year-over-year to 177.921 MMT. This widening gap between production and demand suggests significant inventory accumulation ahead, with global ending stocks projected to rise 7.5% year-over-year to 41.188 MMT.

By origin, FAS predicted Brazil’s output would increase 2.3% year-over-year to 44.7 MMT, India’s would surge 25% year-over-year to 35.3 MMT driven by favorable monsoon conditions and expanded acreage, and Thailand’s would gain 2% year-over-year to 10.3 MMT.

The convergence of energy market weakness, record production forecasts from multiple sources, and anticipated demand growth well below supply expansion has placed sugar prices under sustained pressure as market participants position for an extended period of abundant global supplies.