Sugar Prices Drop as Production Expectations Climb Amid Global Supply

May NY world sugar #11 (SBK25) is down -0.22 (-1.25%), while August London ICE white sugar #5 (SWQ25) has declined by -4.10 (-0.83%).

Current Market Decline

Sugar prices have continued their downward trend this week. NY sugar has fallen to a 2-1/2 year nearest-futures low, with London sugar reaching a 2-week low. An increase in Brazilian sugar production has contributed to this price dip. According to Unica, Brazil’s Center-South sugar production for the first half of April rose by +1.3% year-over-year to 731,000 metric tons. This report from Unica marks the first data for the 2025/26 season. Additionally, Conab has projected an increase in Brazil’s sugar production for 2025/26, with an anticipated rise of +4.0% year-on-year, totaling 45.875 million metric tons.

Weak Demand Signals

Sugar prices were pressured after Green Pool Commodity Specialists reported an abundance of outstanding contracts in NY May sugar futures set to expire Wednesday. A substantial delivery against these contracts indicates weak sugar demand.

Global Production Insights

Over the past month, sugar prices have faced downward pressure due to indications of larger global output. Last Wednesday, the USDA’s Foreign Agricultural Service (FAS) estimated a +2.3% year-on-year increase in Brazil’s sugar production for 2025/26, projecting it at 44.7 million metric tons, up from 43.7 million metric tons the previous season. Abundant rainfall in India is also expected to boost sugar crop yields. India’s Ministry of Earth Sciences has forecasted an above-normal monsoon this year, with total rainfall predicted at 105% of the long-term average, occurring from June through September.

Additional Production Forecasts

On the negative side, consultant Datagro projected on March 12 that Brazil’s Center-South sugar production would rise by +6% year-on-year to 42.4 million metric tons in 2025/26. Green Pool Commodity Specialists also revised their global sugar market outlook, indicating a shift from a deficit of -3.7 million metric tons in 2024/25 to a surplus of +2.7 million metric tons in 2025/26.

Indian Export Regulations

A bearish factor emerged when the Indian government announced on January 20 that it would allow sugar mills to export 1 million metric tons this season, easing restrictions placed in 2023. Since October 2023, India had limited sugar exports to ensure domestic supply stability, exporting only 6.1 million metric tons during the 2022/23 season, compared to a record 11.1 million metric tons the prior year. However, the ISMA projects that India’s sugar production for 2024/25 will decrease by -17.5% year-on-year, dropping to a five-year low of 26.4 million metric tons.

Thailand’s Production Outlook

In Thailand, a bearish forecast appears likely as the Office of the Cane and Sugar Board reported that sugar production for 2024/25 will increase by +14% year-on-year to 10.00 million metric tons. As the world’s third-largest sugar producer and second-largest exporter, Thailand’s output can significantly impact global sugar prices.

Supporting Factors Amidst Price Declines

Despite the current decline, there are some supportive factors for sugar prices. The Indian Sugar and Bio-Energy Manufacturers Association (ISMA) reported a production drop from October 1 to April 15 of 25.5 million metric tons, a decrease of -18% from the prior year. Furthermore, Unica stated on April 14 that the cumulative sugar output in Brazil through March fell by 5.3% year-on-year to 40.169 million metric tons. The ISMA also reduced its production forecast for India to 26.4 million metric tons, down from a previously estimated 27.27 million metric tons due to declining cane yields.

Global Supply and Demand Projections

The International Sugar Organization (ISO) on March 6 raised its forecast for the global sugar deficit in 2024/25 to -4.88 million metric tons from -2.51 million metric tons previously. This indicates a tightening market compared to the -1.31 million metric ton surplus of the 2023/24 season. Also, the ISO adjusted its global sugar production forecast to 175.5 million metric tons, down from 179.1 million metric tons.

Weather Impact on Brazil’s Sugar Harvest

Drought and excessive heat last year adversely affected sugar crops in Brazil’s key producing state, Sao Paulo, leading to significant losses. Green Pool Commodity Specialists estimate that as much as 5 million metric tons of sugar cane may have been lost due to these conditions. As a result, Conab forecasted a -3.4% year-on-year decrease in Brazil’s sugar production for 2024/25, estimating it at 44.118 million metric tons due to lower yields.

Global Consumption Trends

The USDA, in its bi-annual report released on November 21, projected an increase in global sugar production for 2024/25 of +1.5% year-on-year to a record 186.619 million metric tons. Furthermore, global human sugar consumption is expected to rise by +1.2% year-on-year, reaching a new high of 179.63 million metric tons. However, the USDA also foresees a decline in global ending stocks by -6.1% year-on-year, down to 45.427 million metric tons.

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the relevant disclosure policy.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect any other organization.