Global Sugar Glut Takes Shape: Fund Positioning Shifts as Production Forecasts Surge

Sugar prices bounced back sharply on Friday with March NY futures climbing +2.68% to close higher, while London ICE white sugar added +2.44%, as funds covered short positions ahead of a three-day US holiday weekend. However, this rally appears temporary against a tide of rising production estimates that threaten to swamp global markets.

The Supply Tsunami: Why Production Forecasts Keep Rising

The real story beneath the surface isn’t the Friday bounce—it’s the relentless upward revisions to global sugar production. The USDA’s December report sent shockwaves through the market, projecting that 2025/26 global production would hit a record 189.318 MMT, up 4.6% year-over-year, while global consumption is expected to reach only 177.921 MMT. This gap signals a fundamental supply overhang.

India’s role as a production powerhouse has been particularly dramatic. New data from India’s National Federation of Cooperative Sugar Factories revealed that production surged to 15.9 MMT from October through mid-January, up 21% from the same period last year. The India Sugar Mill Association pushes this estimate even higher, forecasting 31 MMT for the 2025/26 season—an 18.8% increase year-over-year. More troubling for prices: mills have shifted away from ethanol production, potentially unlocking 1.7 MMT of additional sugar for export markets.

Brazil’s output picture remains robust despite softer growth rates. Unica reported that Center-South production through mid-December reached 40.158 MMT, up 0.9% year-over-year, with cane crushing dedicated to sugar rising to 50.91% from 48.19% in the prior season. The USDA projects Brazil will produce 44.7 MMT in 2025/26, while Conab’s earlier forecast suggested 45 MMT—either way, record volumes. However, looking ahead to 2026/27, Safras & Mercado forecasts a pullback to 41.8 MMT as lower prices cool production incentives.

Thailand completes the supply trinity. Thai Sugar Millers Corp projects a 5% increase in the 2025/26 crop to 10.5 MMT, with the USDA estimating 10.25 MMT for the world’s third-largest producer.

The Export Flood: India Could Be the Game-Changer

What amplifies the supply risk is export availability. India’s government signaled in November that it may allow additional sugar exports beyond the 1.5 MMT quota already permitted for 2025/26, citing domestic oversupply concerns. With the India Sugar Mill Association trimming ethanol usage estimates to 3.4 MMT from 5 MMT, the country could unleash significant additional supply into world markets. This represents a policy shift—India introduced export quotas only in 2022/23 to protect domestic supplies.

The Bearish Consensus Builds

Global sugar surplus forecasts have climbed consistently. Covrig Analytics raised its 2025/26 surplus estimate to 4.7 MMT from 4.1 MMT, while sugar trader Czarnikow pushed even higher to 8.7 MMT. The International Sugar Organization forecasts a 1.625 million MT surplus for 2025/26, representing a stark reversal from a 2.916 million MT deficit in 2024/25.

Why Friday’s Rally Could Be Fleeting

The immediate price support came from fund positioning. COT data showed funds added 4,544 net long positions in white sugar futures to reach 48,203 contracts—a record since 2011 data tracking began. This extreme long positioning actually signals vulnerability: such heavy bullish bets typically precede sharp reversals when reality clashes with sentiment.

London ICE white sugar futures carry particular risk. If the surplus narrative gains traction, that record fund positioning could reverse just as violently, triggering forced selling.

The Glimmer of Hope: When Will Lower Prices Stem Supply?

Covrig projects that the 2026/27 surplus will compress to 1.4 MMT as weak prices discourage production expansion, particularly in Brazil. Safras & Mercado also expects Brazil’s sugar exports to fall 11% year-over-year in 2026/27 to 30 MMT, suggesting the production boom may be self-limiting. However, that relief is more than a year away.

For now, sugar faces a year-long journey through a surplus environment. While Friday’s bounce reflected tactical short-covering, the medium-term trajectory hinges on whether depressed prices eventually cool the production impulse across India, Brazil, and Thailand. Until then, sugar remains a buyer’s market.