Sugar Prices Decline Amid Increased Production Forecasts

On Monday, July NY world sugar #11 (SBN25) closed at -0.17 (-1.00%), while August London ICE white sugar #5 (SWQ25) fell by -5.20 (-1.09%).

Sugar prices dropped due to expectations of higher production in India, the world’s second-largest producer. The National Federation of Cooperative Sugar Factories of India forecasted a 19% year-over-year increase in sugar production for 2025/26, anticipating output will reach 35 million metric tons (MMT) as a result of expanded planted cane areas.

This recent decline follows a trend where NY sugar hit a 3¾-year low last Thursday, and London sugar experienced a 4½-month low. The USDA projected on May 22 that global sugar production for 2025/26 is set to rise by 4.7% year-over-year to 189.318 MMT, leading to an expected surplus of 41.188 MMT, a 7.5% increase from the previous year.

Higher forecasts from Brazil, another significant sugar producer, also contributed to bearish sentiments. The USDA’s Foreign Agricultural Service predicted Brazil’s sugar production would grow by 2.3% year-over-year to a record 44.7 MMT. Additionally, India’s sugar output is projected to rise by 25% year-over-year, reaching 35.3 MMT, fueled by favorable monsoon conditions.

India’s anticipated above-normal monsoon rain is expected to boost sugar crop yields significantly. The Ministry of Earth Sciences projected total rainfall for this monsoon season to be 105% of the long-term average, with the season running from June to September.

Adding to the bearish outlook, India’s government announced on January 20 that it would permit its mills to export 1 MMT of sugar this season, easing earlier restrictions due to domestic supply concerns. Throughout the previous season, India exported only 6.1 MMT of sugar following a record 11.1 MMT export in the prior season. The Indian Sugar Mills Association (ISMA) forecasts a 17.5% year-over-year decline in sugar production for 2024/25 to 26.2 MMT. Currently, production reports indicate a 17% decrease in sugar output during the 2023 season compared to last year.

Thailand’s sugar output is also set to rise with an anticipated 14% increase to 10.00 MMT for the 2024/25 season, contributing to the negative outlook for prices as Thailand ranks as the third-largest sugar producer globally.

Conversely, decreased sugar production in Brazil may support prices. Reports from Unica show a 6.8% year-over-year drop in the first half of May’s sugar production, totaling 2.408 MMT, while cumulative production has decreased by 22.7% year-over-year.

Signs of reduced global sugar supply are emerging. Unica reported a 5.3% year-over-year decline in Brazil’s center-south sugar output through March 2024/25. Furthermore, a revision from the Indian Sugar and Bio-energy Manufacturers Association lowered India’s sugar production forecast for 2024/25 to 26.4 MMT, down from 27.27 MMT.

The International Sugar Organization raised its 2024/25 global sugar deficit forecast to a nine-year high of -5.47 MMT, from a previous forecast of -4.88 MMT, indicating a tighter market on the heels of a global surplus of 1.31 MMT in 2023/24. Additionally, the ISO cut its production estimate to 174.8 MMT from 175.5 MMT.

Brazil’s sugar crop has also been impacted by last year’s drought and heat waves, which resulted in fires that damaged crops. Green Pool Commodity Specialists estimated losses of up to 5 MMT of sugar cane due to these conditions. Projections from Conab indicate that Brazil’s sugar output for 2024/25 could decline by 3.4% year-over-year to 44.118 MMT, attributing lower yields to adverse weather.

According to the USDA’s biannual report released on May 22, global sugar production is forecasted to reach a record 189.318 MMT for 2025/26, while human sugar consumption is projected to increase by 1.4% year-over-year to a record 177.921 MMT. Ending stocks for 2025/26 are expected to rise by 7.5% year-over-year to 41.188 MMT.

On the date of publication, Rich Asplund did not hold positions in any of the securities mentioned in this article. All information is for informational purposes only. For more details, view the Barchart Disclosure Policy
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