Brazil's Sugar Output Slows as Its Sugar Market Navigates Global Oversupply

Sugar futures posted modest gains this week as traders absorbed mixed signals from the world’s largest producing nations. March New York sugar contracts rose 0.31 cents (+2.24%) to close near highs not seen in a week, while London ICE white sugar gained 5.40 points (+1.34%), but these moves mask deeper tensions reshaping the commodity landscape. The catalyst was Brazil’s unexpected production dip—its sugar output from the Center-South region dropped 36% year-over-year in late January to just 5,000 MT—yet this regional weakness sits uneasily against projections of record global harvests that threaten to keep prices under structural pressure.

Brazil’s Production Challenge Tests Its Sugar Export Engine

The Center-South region, which accounts for over 90% of Brazil’s sugar output, delivered disappointing numbers in the second half of January. Unica, the Brazilian sugarcane industry association, reported the steep 36% y/y decline in sugar production to 5,000 MT. However, when viewed cumulatively through January 2025-26, the region remains ahead of last year’s pace, reaching 40.24 MMT compared to 39.88 MMT in the prior season (+0.9% y/y). The silver lining: producers shifted more cane toward sugar production rather than ethanol, with the sugar-allocation ratio climbing to 50.74% in 2025/26 from 48.14% the previous year. Despite this tactical pivot, Brazil’s long-term outlook shows promise fading. Consulting firm Safras & Mercado projected in late December that Brazil’s 2026/27 sugar production will decline 3.91% to 41.8 MMT from an expected 43.5 MMT in 2025/26, signaling that its sugar export potential faces headwinds. Exports are forecast to contract 11% year-over-year to 30 MMT in 2026/27, representing a meaningful retreat from current activity levels.

India’s Sugar Expansion Reshapes Its Global Export Strategy

While Brazil stumbles, India accelerates. The India Sugar Mill Association (ISMA) disclosed on January 19 that sugar output during the October 1-January 15 period surged 22% year-over-year to 15.9 MMT, demonstrating robust production momentum. For the full 2025/26 season, ISMA raised its forecast to 31 MMT in November, anticipating an 18.8% y/y jump driven by favorable monsoon rains and expanded acreage. This production windfall is enabling New Delhi to dramatically increase its sugar export quota. Last Friday, India’s government approved an additional 500,000 MT of sugar for export in the 2025/26 season, layered atop 1.5 MMT approved previously. India’s government had introduced export quotas in 2022/23 after late rains constrained supplies, but now the situation has inverted—its sugar production boom is allowing policy loosening. As the world’s second-largest sugar producer, India’s export decisions carry outsized influence on global pricing. The ISMA also trimmed its ethanol-use estimate to 3.4 MMT from a July projection of 5 MMT, further opening room for its sugar export acceleration.

Global Surplus Projections Conflict, Keeping Pressure on Prices

The sugar market faces a paradox: strong underlying fundamentals meet pessimistic outlooks. Last Thursday, prices extended a five-month decline and touched their lowest levels in 5.25 years, underscoring persistent bearish sentiment despite short-term supply tightness. Multiple forecasters are predicting continued oversupply. Czarnikow, a major sugar trader, expects a global surplus of 3.4 MMT in 2026/27 following an 8.3 MMT surplus in 2025/26. Green Pool Commodity Specialists calculated a 2.74 MMT surplus for 2025/26 and a 156,000 MT surplus for 2026/27 as of late January. StoneX, another major market participant, projected a 2.9 MMT global surplus for 2025/26 last Friday.

The International Sugar Organization (ISO) offered a more restrained view on November 17, forecasting a 1.625 million MT surplus in 2025-26 following a 2.916 million MT deficit in 2024-25. ISO attributed the surplus to increased production in India, Thailand, and Pakistan. The organization expects global sugar production to climb 3.2% year-over-year to 181.8 million MT in 2025-26. Yet Czarnikow has proven consistently more bearish, raising its global 2025/26 surplus estimate to 8.7 MMT in early November—a jump of 1.2 MMT from its September forecast of 7.5 MMT. Covrig Analytics added another perspective in December, raising its 2025/26 surplus projection to 4.7 MMT from 4.1 MMT in October. Covrig does anticipate relief ahead, projecting the 2026/27 global surplus will narrow to 1.4 MMT as weak prices discourage future production.

Thailand and Other Producers Shape Its Sugar Trade Dynamics

Beyond Brazil and India, other major suppliers are contributing to the supply narrative. The Thai Sugar Millers Corporation projected in early October that Thailand’s 2025/26 sugar crop will expand 5% year-over-year to 10.5 MMT. Thailand ranks as the world’s third-largest sugar producer and second-largest exporter, making its production intentions material to global supply assessments. The USDA, in its December 16 bi-annual report, projected even higher Thai output at 10.25 MMT for 2025/26 (a 2% y/y increase).

The U.S. Department of Agriculture’s December forecast underscores the scale of the supply challenge ahead. USDA projects global 2025/26 sugar production will surge 4.6% year-over-year to a record 189.318 MMT, while human consumption rises more modestly at 1.4% y/y to 177.921 MMT. This divergence—production outpacing demand by a wide margin—explains why global ending stocks are projected to contract 2.9% year-over-year to 41.188 MMT despite absolute surpluses in production. USDA’s Foreign Agricultural Service specifically predicted Brazil’s 2025/26 output at a record 44.7 MMT (up 2.3% y/y), India’s sugar production at 35.25 MMT (up 25% y/y), and Thailand at 10.25 MMT (up 2% y/y). These three nations alone account for roughly 40% of global production, meaning their aggregate trajectory carries decisive influence over its sugar market direction.

Structural Headwinds Persist Despite Near-Term Supportive Signals

The near-term uptick in prices this week reflects temporary supply jitters from Brazil, but the longer-term architecture remains bearish. India’s export quota expansion will depress prices structurally by adding to international supply. Brazil’s projected production decline in 2026/27 offers only modest offset. The concentration of surplus forecasts across the industry—ranging from Czarnikow’s aggressive 8.7 MMT to ISO’s conservative 1.625 MMT for 2025/26—signals broad-based concern about oversupply. Weak prices themselves may eventually throttle production incentives, as Covrig Analytics expects, but that relief remains distant. For now, its sugar market faces the uncomfortable reality of robust production colliding with lackluster demand growth, and price weakness will likely persist until demand accelerates or producers voluntarily reduce acreage commitments.