Sugar Prices Surge Amid Dollar Weakness and Production Concerns

July NY world sugar #11 (SBN25) today has increased by +0.40 (+2.31%), while the August London ICE white sugar #5 (SWQ25) is up +11.30 (+2.32%).

Market Dynamics and Price Movements

Sugar prices are significantly higher today, driven by a decline in the dollar index (DXY00) to a two-week low, which has prompted fund short covering in sugar futures. The surge in prices is further intensified by reports from Unica indicating that poor sugarcane quality in Brazil’s current harvest is causing mills to allocate more cane for ethanol production rather than sugar, which is likely to reduce overall sugar production.

Global Supply Forecasts and Their Impact

In recent weeks, expectations of a global sugar surplus have placed downward pressure on prices, leading to a drop to 1.5-week lows on Tuesday. Last Wednesday, consultant Datagro projected a 2025/26 global sugar surplus of +1.53 million metric tons (MMT), a recovery from a 2024/25 deficit of -4.67 MMT. StoneX also forecasts a surplus of +3.74 MMT for the same period.

Favorable weather conditions in India contribute to expectations of increased sugar output. On May 6, the USDA’s Foreign Agricultural Service (FAS) predicted that India’s 2025/26 sugar production would rise by +26% year-on-year to 35 MMT, thanks to favorable monsoon rains and expanded sugar acreage. Similarly, on April 23, the USDA’s FAS anticipated Brazil’s sugar production would climb by +2.3% year-on-year to 44.7 MMT from 43.7 MMT in the previous season. Conab projected a +4.0% year-on-year increase to 45.875 MMT for Brazil’s 2025/26 sugar production.

Regional Production Predictions

Potentially abundant rainfall in India could further boost sugar crops. India’s Ministry of Earth Sciences expects an above-normal monsoon, forecasting total rainfall to reach 105% of the long-term average for the June to September season. However, in a bearish trend, the Indian government announced on January 20 that it would permit sugar mills to export 1 MMT of sugar this season, easing previous restrictions imposed in 2023. The country had previously exported only 6.1 MMT in the 2022/23 season, down from a record 11.1 MMT in the preceding season. Notably, the Indian Sugar and Bio-energy Manufacturers Association (ISMA) predicts a -17.5% year-on-year drop in India’s 2024/25 sugar production to a five-year low of 26.2 MMT.

The ISMA also reported that from October 1 to May 15, India’s sugar production stood at 25.74 MMT, reflecting a -17% decrease from the same timeframe last year. Additionally, Food Secretary Chopra indicated on May 1 that India’s 2024/25 sugar exports may only reach 800,000 MT, falling below earlier estimates of 1 MMT.

Other Countries’ Production Trends

In Thailand, expectations for higher sugar production also create bearish sentiments in the market. On May 2, Thailand’s Office of the Cane and Sugar Board reported that sugar production for 2024/25 would rise by +14% year-on-year to 10.00 MMT. As the world’s third-largest sugar producer, Thailand is positioned as the second-largest sugar exporter.

Despite the bearish outlook for sugar prices, signs of reduced global sugar output can offer some support. Last Tuesday, Unica reported that Brazil’s 2025/26 Center-South sugar production for April dropped by -38.6% year-on-year to 1.58 MMT. Additionally, they noted a cumulative decrease of 5.3% year-on-year to 40.169 MMT through March for the 2024/25 season. The Indian Sugar and Bio-energy Manufacturers Association also lowered its 2024/25 production forecast to 26.4 MMT from a prior 27.27 MMT estimate, citing diminished sugarcane yields.

Global Market Adjustments

The International Sugar Organization (ISO) recently increased its 2024/25 global sugar deficit forecast to a nine-year high of -5.47 MMT, up from a previous estimate of -4.88 MMT in February. This indicates a tightening market compared to the 2023/24 global sugar surplus of 1.31 MMT. The ISO also revised its global sugar production forecast for 2024/25 down to 174.8 MMT from 175.5 MMT.

Drought and extreme heat conditions last year led to substantial fires in Brazil, severely damaging sugar crops, particularly in the state of São Paulo. Green Pool Commodity Specialists estimated that as much as 5 MMT of sugarcane was lost due to these fires. Conab previously projected a decrease of -3.4% year-on-year to 44.118 MMT for Brazil’s 2024/25 sugar production, linking it to lower sugarcane yields due to unfavorable weather.

The USDA’s bi-annual report, released on November 21, projected that global sugar production for 2024/25 would rise by +1.5% year-on-year to a record 186.619 MMT, while human sugar consumption is expected to increase by +1.2% year-on-year to 179.63 MMT. Global ending stocks for sugar are forecasted to decline by -6.1% year-on-year 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 is for informational purposes only. Please view the Barchart Disclosure Policy for more details.

The views and opinions expressed herein belong to the author and do not necessarily reflect those of Nasdaq, Inc.