Global Sugar Prices Undercut by Expanding Production in India, Brazil, and Thailand

Sugar prices are under mounting pressure as production surges across major growing regions. March NY world sugar futures (SBH26) declined 0.02 cents (-0.14%), while May London ICE white sugar (SWK26) fell 0.90 cents (-0.22%) as bearish supply fundamentals dominate market sentiment. The outlook for expanded global sugar output is systematically undercutting price levels, with analysts and trading firms now forecasting substantial surpluses through 2026/27.

India’s Production Surge Leads Global Supply Growth

India’s 2025/26 sugar production is projected to reach 29.3 million metric tons (MMT), representing a 12% year-over-year increase, according to the Indian Sugar and Bio-energy Manufacturers Association (ISMA). This production expansion is undercutting prices across futures markets and signals India’s intention to expand sugar exports significantly. The Indian government approved an additional 500,000 MT of sugar for export in the 2025/26 season on top of the existing 1.5 MMT quota, bringing total approved exports to 2 MMT.

Early season performance supports this bullish production outlook. From October 1 to January 15, India produced 15.9 MMT of sugar, up 22% year-over-year. Meanwhile, India’s sugar mills reduced ethanol production to 3.4 MMT from an earlier forecast of 5 MMT, allowing more sugar to flow toward export channels. This supply dynamics shift directly pressures prices for exporters like Brazil that compete in global markets.

Brazil’s Export Challenges Amid Currency Strength Weigh on Momentum

While India expands production, Brazil faces headwinds in a different dimension: currency strength. The Brazilian real rallied to a 1.75-year high against the dollar, making Brazilian sugar exports less price-competitive globally. This foreign exchange dynamic partially cushions price losses by discouraging Brazilian export sales at current levels.

However, signs of lower sugar output in Brazil’s Center-South region provide some support. Production in the second half of January fell 36% year-over-year to just 5,000 MT according to Unica, Brazil’s sugarcane industry group. Yet cumulative 2025/26 Center-South output through January stands 0.9% higher year-over-year at 40.24 MMT, indicating the region remains on pace for growth. Significantly, the ratio of sugarcane crushed for sugar production increased to 50.74% in 2025/26 from 48.14% in 2024/25, signaling mills are prioritizing sugar over ethanol.

Global Surplus Forecasts Point to Persistent Downward Price Pressure

Multiple forecasters project substantial global sugar surpluses that will undercut prices through successive seasons. The International Sugar Organization (ISO) expects a 1.625 MMT surplus in 2025/26 following a 2.916 MMT deficit in 2024/25, with increased production in India, Thailand, and Pakistan driving the swing. ISO forecasts global sugar production will rise 3.2% year-over-year to 181.8 MMT in 2025/26.

The USDA’s Foreign Agricultural Service painted an even more robust production picture in its December 16 report. The USDA projected global 2025/26 sugar production at a record 189.318 MMT (+4.6% year-over-year), exceeding human consumption of 177.921 MMT (+1.4% year-over-year). Global sugar ending stocks are forecast to decline 2.9% year-over-year to 41.188 MMT, indicating even with consumption growth, inventories remain elevated.

By region, Brazil’s 2025/26 output is expected to reach a record 44.7 MMT (+2.3% year-over-year), India’s production will surge to 35.25 MMT (+25% year-over-year driven by favorable monsoon rains and expanded acreage), and Thailand’s output will climb 2% year-over-year to 10.25 MMT. Thailand ranks as the world’s third-largest sugar producer and second-largest exporter, making its production trends material to global pricing.

Trading firms concur on the bearish backdrop. Czarnikow projected a global surplus of 8.7 MMT for 2025/26 (increased from a September estimate of 7.5 MMT), with another 3.4 MMT surplus expected in 2026/27. Green Pool Commodity Specialists forecast a 2.74 MMT surplus in 2025/26 and a 156,000 MT surplus in 2026/27, while StoneX estimated a 2.9 MMT surplus for 2025/26. Safras & Mercado predicted Brazil’s sugar production will fall 3.91% to 41.8 MMT in 2026/27 from an expected 43.5 MMT in 2025/26, with exports declining 11% year-over-year to 30 MMT.

Record Fund Short Positioning Sets Stage for Potential Rally

Despite the bearish fundamentals undercutting prices, market positioning presents a technical wildcard. The Commitment of Traders (COT) report for the week ended February 17 revealed that funds elevated their net short position in NY sugar futures and options by 14,381 contracts to a record 265,324 net shorts—the highest level in data going back to 2006. This extreme positioning creates potential for sharp short-covering rallies if sentiment shifts.

Sugar prices plunged to 5.25-year lows on February 12 amid growing conviction that a persistent global surplus will pressure prices for years. The rapid deterioration in fundamentals and aggressive fund short-selling reflect market anxiety over structural oversupply. However, such elevated short positioning historically increases vulnerability to rapid reversal rallies, particularly if supply disruptions or demand surprises emerge. For now, the combination of rising global production and fund bearishness keeps prices undercut and volatile.