Sugar Prices Decline Amid Global Surplus Projections
On Thursday, July NY world sugar #11 (SBN25) closed down -0.39 (-2.16%), while August London ICE white sugar #5 (SWQ25) fell by -10.90 (-2.16%).
Market Overview: Surplus Expectations
Sugar prices faced a downturn due to predictions of a global sugar surplus. Consultant Datagro reported on Wednesday that it anticipates a global sugar surplus of +1.53 million metric tons (MMT) for the 2025/26 season. This marks a significant recovery from the projected deficit of -4.67 MMT in 2024/25. Additionally, StoneX forecasts an even larger surplus of +3.74 MMT for the same period.
Factors Influencing Sugar Prices
The expectation of increased global sugar output is pressuring prices. Reports from the USDA’s Foreign Agricultural Service (FAS) predict that India’s sugar production will rise by +26% year-on-year to 35 MMT due to beneficial monsoon rains and expanded sugar acreage. Meanwhile, Brazil’s sugar production is also expected to increase; the USDA’s FAS predicts a rise of +2.3% year-on-year, reaching 44.7 MMT from 43.7 MMT the previous season. Conab has a slightly higher forecast, estimating a +4.0% increase to 45.875 MMT.
India’s Monsoon Outlook and Production Risks
The Indian monsoon is projected to bring above-normal rainfall, which may lead to a larger sugar crop. The Ministry of Earth Sciences forecast total rainfall to be 105% of the long-term average for this year’s monsoon season, which runs from June through September. However, the Indian Sugar Mills Association (ISMA) predicts a decrease in sugar production for the 2024/25 season, forecasting a drop of -17.5% year-on-year to a five-year low of 26.4 MMT.
Export Dynamics and Policy Changes
On January 20, the Indian government announced that it would permit sugar mills to export 1 MMT of sugar this season, easing previously imposed export restrictions. In the 2022/23 season, India allowed a record 11.1 MMT of exports but restricted exports to 6.1 MMT by September 30 last year. Recent estimates suggest India’s sugar exports for 2024/25 may only reach 800,000 MT, which is lower than earlier expectations.
Thai Production and Global Impacts
The forecast for higher sugar production in Thailand adds additional bearish pressure. Thailand’s Office of the Cane and Sugar Board reported a +14% year-on-year increase in sugar production to 10 MMT for the 2024/25 season. As the world’s third-largest sugar producer and second-largest exporter, Thailand’s output is closely watched globally.
Counterbalancing Factors: Signs of Lower Production
Despite some bullish indicators, there are signs of reduced sugar production elsewhere that could support prices. Reports indicate that Brazil’s Center-South sugar production fell by -38.6% year-on-year to 1.58 MMT for April 2025. Unica reported a cumulative decrease of 5.3% year-on-year in Brazil’s 2024/25 Center-South sugar output through March. Additionally, the ISMA cut its production forecast for India, citing a decline in cane yields.
Shifting Global Market Dynamics
The International Sugar Organization (ISO) updated its 2024/25 global sugar deficit forecast to -5.47 MMT, a nine-year high, indicating tighter market conditions compared to the surplus of 1.31 MMT in 2023/24. They also revised their global production estimates downward from 175.5 MMT to 174.8 MMT.
Impacts of Climate Events
Recent droughts and heat waves have caused significant crop losses in Brazil, specifically in the São Paulo region. Green Pool Commodity Specialists noted that up to 5 MMT of sugar cane could have been lost due to environmental factors. Consequently, Conab projected a -3.4% year-on-year decline in Brazil’s sugar production to 44.118 MMT due to these adverse climatic conditions.
Future Projections
The USDA, in its bi-annual report released on November 21, forecasted a +1.5% year-on-year increase in global sugar production for 2024/25, reaching a record 186.619 MMT. Moreover, human sugar consumption is expected to rise by +1.2% year-on-year, totaling 179.63 MMT. However, the USDA projects a -6.1% decline in global ending stocks to 45.427 MMT.
On the date of publication, Rich Asplund did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
