Sugar Market Squeeze: Why Brazil's Production Cuts Are Sending Prices to 5-Week Highs

Sugar futures just spiked to their highest levels in five weeks, and there’s a tug-of-war brewing between supply constraints and surplus forecasts.

The Bullish Catalyst: Brazil Tightens Supply

StoneX just downgraded Brazil’s 2026/27 Center-South sugar output to 41.5 million metric tons (MMT)—down 0.6 MMT from September’s estimate. This modest cut sparked today’s rally: NY March sugar (SBH26) climbed 1.41%, while London ICE white sugar (SWH26) gained 1.31%.

But here’s the kicker—India’s just thrown another wrench into the supply picture. New Delhi’s considering hiking ethanol prices to incentivize mills to crush cane for fuel rather than sugar, potentially shrinking global sugar supplies. Meanwhile, India’s capped sugar exports at 1.5 MMT for 2025/26 (down from 2 MMT), tightening the global market even more.

The Bearish Reality Check: Surplus Incoming

Don’t pop the champagne yet. The International Sugar Organization (ISO) just flipped the script—forecasting a 1.625 MMT surplus for 2025-26, a sharp reversal from last year’s 2.916 MMT deficit. Why the 180? Three words: India, Thailand, Pakistan.

Here’s the macro picture: Global sugar production is set to surge 3.2% year-over-year to 181.8 MMT in 2025-26, while consumption only climbs 1.4%. That surplus will weigh on prices come 2026.

The Numbers Behind the Move

India’s production explosion: The Indian Sugar Mill Association (ISMA) just hiked 2025/26 estimates to 31 MMT from 30 MMT—an 18.8% year-over-year jump. Some analysts are even more bullish, projecting 34.9 MMT (19% y/y growth) thanks to bumper monsoon rains and expanded acreage.

Brazil’s resilience: Despite StoneX’s cut, cumulative Center-South output through October was up 1.6% y/y to 38.085 MMT. Mills are diverting more cane to sugar (46.02% vs. 45.91% last year), signaling strong crush rates.

Thailand’s contribution: The world’s third-largest sugar producer is ramping up too—2025/26 crop expected to hit 10.5 MMT (+5% y/y).

The Bottom Line

Yes, Brazil’s supply cuts are real. Yes, India’s export restrictions add friction. But the elephant in the room is a looming global surplus that could drag prices lower once the dust settles. Today’s 5-week highs might be a head-fake—traders are pricing in near-term tightness, but medium-term fundamentals suggest oversupply is coming.