Global Sugar Surplus Undercuts Market Momentum as Brazil Ramps Up Output

Sugar futures are facing renewed pressure from expanding production across major supplying nations, with Brazil leading the charge. March NY NYMEX sugar #11 (SBH26) dropped 0.02 points (-0.13%) while London ICE white sugar #5 (SWH26) managed a modest 2.00 point gain (+0.47%), reflecting mixed trader sentiment on conflicting supply and demand signals.

Brazilian Production Surge Weighs on Prices

The core bearish catalyst emerged today when Unica reported that Brazil’s Center-South region crushed 40.158 MMT of sugar through mid-December in the 2025-26 season, representing a 0.9% year-over-year increase. More significantly, the ratio of cane directed toward sugar production climbed to 50.91% from 48.19% the prior season, indicating millers are prioritizing sugar output over ethanol. This strategic shift undercuts market prices as global supplies continue expanding.

Multiple forecasters have aligned on bullish production trends for Brazil. Conab, the Brazilian government’s crop agency, lifted its 2025-26 estimate to 45 MMT in November, while the USDA’s Foreign Agricultural Service projected record output of 44.7 MMT. However, the positive news for future price support comes from Safras & Mercado’s December projection that 2026-27 production will decline 3.91% to 41.8 MMT, suggesting the current surplus cycle may be temporary.

India’s Output Surge Pressures Global Pricing

India’s production acceleration presents an additional headwind for prices. The India Sugar Mill Association reported that output through December jumped 25% year-over-year to 11.90 MMT, with full-season 2025-26 production revised upward to 31 MMT—an 18.8% annual gain. The organization simultaneously reduced its ethanol allocation estimate from 5 MMT to 3.4 MMT, potentially freeing up additional export capacity.

Government policy is further exacerbating supply concerns. India’s food ministry approved 1.5 MMT in export quota for the 2025-26 season to manage domestic oversupply, marking a reversal from the strict export controls implemented following 2022-23 supply shortages. As the world’s second-largest producer, India’s aggressive export posture undercuts attempts to tighten global markets.

Competing Structural Factors and Global Estimates

The International Sugar Organization projected a 1.625 million MT surplus for 2025-26, driven by increased production in India, Thailand, and Pakistan. Global output is expected to reach 181.8 MMT (up 3.2% annually), while consumption grows only 1.4% to 177.921 MMT. The USDA’s December forecast was even more bearish, projecting record production of 189.318 MMT against consumption of 177.921 MMT.

Yet countervailing factors prevent a complete price collapse. Covrig Analytics raised its surplus estimate to 4.7 MMT but projected the 2026-27 surplus would contract sharply to 1.4 MMT as lower prices discourage future planting. Additionally, Citigroup identified potential index-related buying interest, estimating $1.2 billion in commodity index rebalancing flows into sugar futures this week through the BCOM and S&P GSCI indexes.

Thailand’s Expansion and Market Outlook

Thailand, the world’s third-largest producer and second-largest exporter, is projected to boost 2025-26 production by 5% to 10.5 MMT according to the Thai Sugar Millers Corp. The USDA forecasts a more modest 2% increase to 10.25 MMT. Combined Thai and Indian output growth continues to undercuts price recovery attempts despite expectations of tighter 2026-27 supply dynamics.

Global sugar ending stocks are projected to decline 2.9% year-over-year to 41.188 MMT, providing marginal support. Traders weighing these cross-currents face a narrative of near-term supply abundance offsetting longer-term tightening prospects—a dynamic that has consistently pressured March contracts while leaving room for tactical rallies during index rebalancing events.