Global Sugar Surplus Undercuts Market Valuations Amid Record Production Forecasts

Sugar prices are experiencing significant downward pressure as abundant global supplies undercut market sentiment. March New York world sugar #11 (SBH26) fell -0.02 (-0.14%), while March London ICE white sugar #5 (SWH26) declined -1.60 (-0.39%). The broader trend is stark: NY sugar has plunged to 2.5-month lows, and London sugar has hit 5-year lows, reflecting a fundamental market imbalance between growing production and weakening demand dynamics.

Supply Surplus Undercuts Price Recovery Across Major Markets

The fundamental driver behind the selloff is unmistakable: global sugar supplies are dramatically outpacing consumption. Multiple forecasting agencies have painted a consistent picture of oversupply. Green Pool Commodity Specialists projects a 2.74 million metric ton (MMT) global sugar surplus for 2025/26, followed by a 156,000 MT surplus in 2026/27. StoneX’s outlook is even more bearish, forecasting a 2.9 MMT surplus for 2025/26. The International Sugar Organization (ISO) estimates a 1.625 million MT surplus in 2025-26 following a 2.916 million MT deficit in the previous year. However, Czarnikow, a major sugar trader, presents the most aggressive surplus estimate at 8.7 MMT for 2025/26—a figure that undercuts any meaningful price recovery in the near term.

These surplus forecasts drive a wedge between producers’ output expectations and market absorption capacity. Covrig Analytics initially raised its 2025/26 global surplus estimate to 4.7 MMT in December (from 4.1 MMT in October), though it projects the 2026/27 surplus will contract to 1.4 MMT as lower prices discourage production increases.

Brazil’s Record Output and India’s Export Expansion Weigh on Market Sentiment

Brazil, the world’s largest sugar producer, is on track for record production. Conab raised its 2025/26 Brazil sugar production forecast to 45 MMT in November, up from an earlier estimate of 44.5 MMT. More significant is the shift in sugar-to-ethanol crushing ratios: the ratio of cane crushed for sugar rose to 50.82% in 2025/26 from 48.16% in 2024/25, indicating a strategic focus on sugar output over biofuel production. Unica reported in January that Brazil’s cumulative 2025-26 Center-South sugar output surged +0.9% year-over-year to 40.222 MMT.

India’s trajectory is equally concerning for price stability. The India Sugar Mill Association (ISMA) announced in January that 2025-26 sugar output from October through mid-January reached 15.9 MMT, representing a +22% year-over-year surge. More broadly, ISMA raised its full-year 2025/26 production estimate to 31 MMT (from a prior 30 MMT forecast), marking an +18.8% year-over-year increase. Critically, India is reducing ethanol production: ISMA cut its estimate for sugar used in ethanol to 3.4 MMT (from a July forecast of 5 MMT), freeing up additional sugar for export markets. This shift undercuts global prices by increasing competitive export supply from the world’s second-largest producer.

India’s government has signaled its intent to boost sugar exports to alleviate a domestic supply glut. The food ministry approved 1.5 MMT of sugar exports for the 2025/26 season via a quota system, a policy reintroduced after late rains in 2022/23 had constrained production.

Thailand, the world’s third-largest sugar producer and second-largest exporter, is also ramping up output. The Thai Sugar Millers Corp projected in October that Thailand’s 2025/26 sugar crop will expand +5% year-over-year to 10.5 MMT, adding further competitive pressure to global markets.

Global Production Surge vs. Consumption Outlook Through 2026/27

The USDA’s December forecast underscores the structural imbalance. Global 2025/26 sugar production is projected to climb +4.6% year-over-year to a record 189.318 MMT, while human sugar consumption is expected to increase just +1.4% year-over-year to 177.921 MMT. This production-to-consumption gap—more than 11 MMT surplus—undercuts any recovery narrative.

The USDA’s Foreign Agricultural Service provided granular regional projections: Brazil’s 2025/26 production is forecast to rise 2.3% year-over-year to a record 44.7 MMT; India’s output is projected to surge 25% year-over-year to 35.25 MMT, driven by favorable monsoon conditions and expanded planting; Thailand’s crop is estimated to grow +2% year-over-year to 10.25 MMT. These increases combine to create a structural surplus that undercuts price support levels.

Global sugar ending stocks are projected to decline -2.9% year-over-year to 41.188 MMT, a modest correction that provides limited relief to near-term price dynamics.

Future Market Balance: 2026/27 Supply Softening as a Potential Price Floor

While the 2025/26 season appears deeply oversupplied, there are early signs that market rebalancing may begin in 2026/27. Safras & Mercado, a consulting firm, projects that Brazil’s sugar production will fall -3.91% to 41.8 MMT in 2026/27 from 43.5 MMT expected in 2025/26. The firm further forecasts Brazil’s exports will decline -11% year-over-year to 30 MMT, suggesting that weaker prices may finally suppress production incentives. Covrig Analytics similarly projects the 2026/27 global surplus will compress to 1.4 MMT—a substantial tightening from 2025/26 levels.

This longer-term supply adjustment may eventually provide structural support for prices. However, for the immediate term, ample global supplies continue to undercut market valuations across NY and London trading venues, with the structural imbalance likely to persist throughout the 2025/26 season. Only as production incentives weaken and export volumes normalize can meaningful price recovery scenarios emerge.