Global Sugar Surplus Expands as Production Climbs, with Monsoon Rain Effects Boosting Key Regions

The sugar market is experiencing significant downward pressure as forecasters anticipate a substantial global oversupply in the 2025/26 season. Contract prices have moved sharply lower across major trading hubs—NY sugar #11 (SBH26) declined 0.44 cents to trade at -2.99% today, while London ICE white sugar #5 (SWH26) shed 6.40 points, registering a -1.55% loss. This represents a broader weekly sell-off that has pushed NY futures to 2.5-month lows and London contracts to 5-year lows, driven primarily by expectations of record global production outpacing consumption.

Record Sugar Production Drives Global Oversupply

Multiple forecasting agencies are projecting a significant supply surplus for the 2025/26 cycle. The USDA’s December report predicted that global sugar production would climb 4.6% year-over-year to a record 189.318 million MT, while consumption would increase just 1.4% to 177.921 million MT. This supply-demand imbalance is creating persistent downward pressure on sugar prices across all major exchanges.

Independent analysts and commodity specialists have similarly raised their surplus projections. Czarnikow, a leading sugar trading firm, boosted its global 2025/26 surplus estimate to 8.7 million MT, representing a 1.2 million MT increase from earlier forecasts. The International Sugar Organization projected a 1.625 million MT surplus, while Green Pool Commodity Specialists and StoneX each forecast surpluses of 2.74 million MT and 2.9 million MT respectively. Even Covrig Analytics, after initially projecting a 4.1 million MT surplus in October, raised its estimate to 4.7 million MT in December. The consistent upward revisions across multiple institutions underscore the magnitude of the oversupply pressure building in the market.

Monsoon Rain and Favorable Weather Propel Indian Sugar Output to New Levels

India has emerged as a critical factor in the global sugar surplus equation. The India Sugar Mill Association reported that production from October 1 through mid-January jumped 22% year-over-year to 15.9 million MT, significantly outpacing expectations. The association subsequently elevated its full-season 2025/26 production estimate to 31 million MT from an earlier 30 million MT forecast—representing an 18.8% year-over-year increase driven substantially by favorable monsoon rains that replenished soil moisture and enabled expanded sugar cane acreage.

The USDA’s Foreign Agricultural Service provided even more bullish guidance for Indian production, forecasting a 25% year-over-year surge to 35.25 million MT. The combination of abundant precipitation from monsoon systems and increased planting area has positioned India to capture a larger share of global sugar exports. Notably, the association also reduced its ethanol-use projection to 3.4 million MT from 5 million MT, potentially freeing up additional sugar for export markets. With India serving as the world’s second-largest producer, these production surges are amplifying downward pressure on global sugar prices.

Brazil and Thailand Contribute to Export Wave Pressuring Sugar Prices

Brazil’s contribution to the global surplus remains substantial despite softening long-term outlooks. Conab, Brazil’s official crop forecasting agency, raised its 2025/26 production estimate to 45 million MT in November, up from 44.5 million MT previously. The USDA’s Foreign Agricultural Service similarly projected Brazilian output would reach a record 44.7 million MT, reflecting a 2.3% year-over-year increase. Unica reported that Brazil’s Center-South cumulative sugar output through December climbed 0.9% year-over-year to 40.222 million MT, with a greater share of cane being directed toward sugar production rather than ethanol.

Thailand, the world’s third-largest sugar producer and second-largest exporter, is also contributing to production expansion. The Thai Sugar Millers Corp projected output would increase 5% year-over-year to 10.5 million MT for 2025/26, with the USDA forecasting a 2% rise to 10.25 million MT. These production gains from multiple export-oriented suppliers are contributing to competitive export dynamics that suppress global sugar pricing.

Policy Support for Exports Amplifies Supply Pressures

Government policy decisions are reinforcing the bearish supply dynamic. In November, India’s food ministry announced it would permit mills to export 1.5 million MT of sugar in the 2025/26 season, removing prior constraints on export volumes. This policy shift follows India’s 2022/23 decision to implement a quota system after late rains had previously limited domestic sugar supplies. The current policy reversal reflects the dramatic supply situation reversal, with abundant rainfall and record production now creating a need for demand stimulus through export expansion.

Medium-Term Supply Pressures May Offer Tactical Opportunities

While the 2025/26 season presents significant surplus challenges for sugar producers, medium-term forecasts offer some support for prices. Safras & Mercado consulting firm projected that Brazilian production would decline 3.91% to 41.8 million MT in 2026/27, down from the 43.5 million MT expected in 2025/26. The firm also forecast Brazilian sugar exports would fall 11% year-over-year to 30 million MT in the forward season. Covrig Analytics similarly projected that the 2026/27 global sugar surplus would moderate to just 1.4 million MT, as weak prices discourage production commitments in the upcoming cycle.

These longer-dated forecasts suggest that the current price weakness may eventually tighten supply-demand fundamentals. However, with global ending stocks projected to fall just 2.9% year-over-year to 41.188 million MT according to the USDA, the near-term sugar market faces continued headwinds from abundant supply, competitive export positioning from major producing regions, and policy support for export volumes. The outlook for sustained supply surpluses continues to weigh heavily on sugar valuations across both NY and London trading venues.