Global Sugar Production Surge Weighs Heavily on Market Prices

Recent developments in major sugar-producing regions are reshaping the outlook for sugar stocks and market fundamentals. Production figures from across Asia, Latin America, and emerging export pressures are creating substantial downward pressure on commodity prices. The combination of record output forecasts and shifting supply dynamics signals a challenging period ahead for sugar market participants seeking investment opportunities.

India’s Production Boom: A Game-Changer for Global Supply

India continues to emerge as a critical driver of global sugar dynamics. According to the India Sugar Mill Association (ISMA), the nation’s production during the October 1 to January 15 period of the 2025-26 season reached 15.9 million metric tons (MMT), marking a substantial 22% year-over-year increase. This acceleration reflects favorable monsoon conditions and expanded cultivation areas dedicated to sugarcane.

The ISMA’s November report further boosted its full-year 2025-26 projection to 31 MMT from an earlier forecast of 30 MMT—representing an 18.8% increase compared to the previous year. Notably, the association revised downward its estimate for sugar destined for ethanol production, cutting it from 5 MMT to 3.4 MMT. This adjustment creates additional supply available for export, positioning India to capitalize on its position as the world’s second-largest producer.

Government policies are amplifying export pressures. India’s food ministry approved 1.5 MMT of sugar exports for the 2025-26 season, easing restrictions that had been in place since 2022 when production constraints necessitated domestic supply protections. These export approvals suggest New Delhi aims to address domestic oversupply while capturing international market share.

Brazil and Thailand Propel Global Surplus

Brazil’s contribution to the current supply glut remains substantial. Unica, the Brazilian sugarcane industry association, reported that Center-South sugar output through mid-December reached 40.158 MMT, up 0.9% year-over-year. More significantly, the proportion of cane crushed for sugar (rather than ethanol) rose to 50.91% in 2025-26 from 48.19% in 2024-25, indicating millers’ preference to prioritize sugar over biofuels.

Conab, Brazil’s official crop forecasting agency, elevated its 2025-26 production estimate to 45 MMT in November, up from an earlier projection of 44.5 MMT. The USDA’s Foreign Agricultural Service (FAS) independently forecast Brazilian production at 44.7 MMT for 2025-26, representing a 2.3% year-over-year gain.

Thailand, ranking third globally in sugar production and second in exports, is also expanding capacity. The Thai Sugar Millers Corporation projected a 5% year-over-year increase to 10.5 MMT for the 2025-26 season. The USDA FAS offered a slightly more conservative view, predicting a 2% increase to 10.25 MMT.

Mounting Global Surplus Reshapes Market Outlook

The convergence of rising production across multiple regions is crystallizing into a substantial global surplus. The International Sugar Organization (ISO) forecasted a 1.625 million MT surplus for 2025-26, a dramatic reversal from a 2.916 million MT deficit in 2024-25. ISO attributed this shift primarily to increased production in India, Thailand, and Pakistan.

Multiple forecasting bodies have revised surplus estimates upward. Covrig Analytics elevated its 2025-26 global surplus projection to 4.7 MMT in recent reports, compared to an October estimate of 4.1 MMT. Sugar trader Czarnikow boosted its surplus estimate further to 8.7 MMT for the same period. The USDA’s December report projected global 2025-26 production climbing 4.6% to a record 189.318 MMT, while consumption would grow only 1.4% to 177.921 MMT—widening the supply-demand imbalance.

However, relief may emerge in the subsequent season. Consulting firm Safras & Mercado projected that Brazil’s 2026-27 production would decline 3.91% to 41.8 MMT from 43.5 MMT, with exports falling 11% year-over-year to 30 MMT. Covrig Analytics similarly forecasted the global surplus contracting to just 1.4 MMT in 2026-27 as depressed prices discourage production expansion.

Price Pressure and Market Positioning

The abundance of supply is directly suppressing near-term quotations. March NY world sugar #11 contracts have declined 1.54%, while March London ICE white sugar #5 futures fell 1.15% as traders digest the mounting surplus outlook. The downward momentum raises concerns given the positioning of financial participants.

According to the latest Commitment of Traders (COT) report, fund managers substantially increased their long positions in London ICE white sugar futures, adding 4,544 net contracts to reach a record 48,203 positions dating back to 2011. This historically elevated positioning creates vulnerability to sharper price declines if market sentiment shifts or supply projections are revised further downward.

Investment Implications for Sugar Market Observers

The current confluence of record production forecasts, government export permissions, and abundant global inventories presents headwinds for those with bullish sugar market outlooks. While the 2026-27 season promises tighter fundamentals and production pullbacks, the immediate term demands attention to mounting supply dynamics and their impact on futures and related equity positions in the sugar sector. Market participants tracking sugar stocks and commodity news should remain alert to production reports and weather forecasts that could accelerate or delay the market’s eventual supply-demand rebalancing.