Global Sugar Market Faces Slightly Softer Prices Amid Production Surge

Sugar markets finished the trading session with mixed signals as structural supply pressures clash with short-term currency movements. NY March sugar futures climbed slightly, gaining 0.04 points to close at +0.27%, while London’s white sugar contracts retreated 1.00 points or -0.24%. The divergence highlights the complex interplay between regional production dynamics and currency effects that are reshaping sugar fundamentals in early 2026.

The Brazilian real surged to a 20-month high, triggering short covering in NY contracts as traders repositioned ahead of Brazil’s production cycle. A stronger real currency typically dampens export enthusiasm from Brazil’s mills, providing brief support for prices. However, this minor rally masks a much larger bearish trend: global sugar production is accelerating at a pace not seen in years, with output outpacing demand growth by a significant margin.

Brazil’s Record Output Reshapes Sugar Dynamics

Brazil remains the world’s dominant sugar producer, and projections for the current cycle continue climbing. The USDA’s Foreign Agricultural Service raised its Brazil 2025-26 production forecast to a record 44.7 MMT, representing a 2.3% year-over-year increase. Brazil’s cumulative Center-South sugar output through December already reached 40.222 MMT, up 0.9% compared to the same period last year, with mills shifting more cane toward sugar production—the crushing ratio for sugar rose to 50.82% from 48.16% in the prior season.

Yet looking ahead, the outlook turns less constructive. Safras & Mercado projected that Brazil’s 2026-27 production will slip to 41.8 MMT, down 3.91% from the current season’s expected 45 MMT. This production decline would translate into lower export volumes, with shipments potentially falling 11% to around 30 MMT. The market is pricing in this gradual moderation as a slightly positive factor for longer-term price stability.

India and Thailand Ramp Up Production

India’s sugar output trajectory represents the most aggressive expansion in global supply. The India Sugar Mill Association reported a stunning 22% year-over-year surge in early-season production (Oct 1-Jan 15) reaching 15.9 MMT. For the full 2025-26 season, ISMA and the USDA FAS both expect India’s output to soar—ISMA projects 31 MMT (up 18.8% y/y) while FAS forecasts 35.25 MMT (up 25% y/y), driven by favorable monsoon rainfall and expanded cultivated acreage.

Critically, India’s government is loosening export restrictions. After implementing strict quotas in 2022-23, the food ministry approved 1.5 MMT in export permits for 2025-26, with the food secretary signaling the possibility of additional allowances to manage domestic oversupply. This export liberalization could substantially increase global supply flows.

Thailand, the world’s third-largest producer and second-largest exporter, is also expanding. Thai Sugar Millers Corp projected a 5% year-over-year increase to 10.5 MMT for 2025-26, with the USDA FAS estimating 10.25 MMT with a 2% gain. While smaller than India’s expansion, Thailand’s growth compounds the global surplus challenge.

Global Surplus Pressures Markets Despite Structural Support

Multiple forecasting authorities converge on a critical conclusion: global sugar markets are entering a sustained surplus environment. The USDA’s most recent projection (December 16) showed global 2025-26 production climbing 4.6% year-over-year to an unprecedented 189.318 MMT, while consumption grows a more modest 1.4% to 177.921 MMT. This 11+ MMT production-consumption gap is the crux of the bearish picture.

The International Sugar Organization, in its November report, estimated a 1.625 million MT surplus for 2025-26 after a 2.916 million MT deficit in 2024-25—a dramatic swing. ISO attributes the surplus to concentrated gains in India, Thailand, and Pakistan production. Even more bearish, sugar trader Czarnikow boosted its 2025-26 surplus estimate to 8.7 MMT, nearly double the ISO’s calculation.

Covrig Analytics raised its global surplus forecast to 4.7 MMT in early December, though it offered slightly more hopeful news for the 2026-27 season. Covrig projects the surplus will moderate to just 1.4 MMT as depressed prices discourage new plantings. Globally, ending stocks are projected to fall 2.9% year-over-year to 41.188 MMT, limiting inventory rundowns that might provide price floor support.

USDA Projects Record Output and Consumption

The USDA’s semi-annual assessment, released December 16, paints the most comprehensive picture of 2025-26 dynamics. Beyond the headline 189.318 MMT production figure and 177.921 MMT consumption forecast, the agency projects record activity levels across multiple dimensions. Global sugar ending stocks of 41.188 MMT represent slightly lower inventory coverage than previous years, though still substantial enough to support sustained price pressure.

Regional breakdowns underscore the supply concentration: Brazil at 44.7 MMT (new high), India at 35.25 MMT (massive year-over-year expansion), and Thailand at 10.25 MMT all point to a supply-driven market. The cumulative regional output gains far exceed global demand growth, structurally favoring lower prices through 2026 unless demand surprises materially accelerate or major producers encounter unexpected production setbacks.