Stronger Brazilian Sugar Output Pressures Prices

Sugar Prices Face Pressure from Increased Production and Export Expectations

On Wednesday, the October New York (NY) world sugar contract #11 (SBV25) closed down by -0.08 (-0.50%), while the October London ICE white sugar #5 (SWV25) fell by -1.50 (-0.32%). Despite these declines, sugar prices remained above Tuesday’s 5-week lows. The downward trend in prices has been influenced by several factors, including stronger sugar production in Brazil, which is undercutting market expectations.

One key factor contributing to the pressure on sugar prices is the increase in Brazil's sugar output. According to Unica, Brazil’s Center-South sugar output in the first half of July rose by +15% year-over-year (y/y) to 3.4 million metric tons (MMT). Additionally, the amount of sugarcane being crushed for sugar by Brazil's sugar mills increased to 54% from 50% during the same period last year. This surge in production suggests a growing supply, which could further weigh on global sugar prices.

India’s Potential Export Surge Could Weigh on Prices

India, the world's second-largest sugar producer, is also expected to see higher sugar exports in the upcoming season. Bloomberg reported that India may allow local sugar mills to export sugar starting in October, as abundant monsoon rains are likely to produce a bumper crop. The Indian Meteorological Department noted that cumulative monsoon rain in India reached 500.8 mm as of August 4, which is 4% above normal.

The Indian Sugar and Bio-energy Manufacturers Association announced it will seek permission to export 2 MMT of sugar in the 2025/26 season. Furthermore, the National Federation of Cooperative Sugar Factories projected that India's 2025/26 sugar production would rise by +19% y/y to 35 MMT, citing larger planted cane acreage. This increase follows a significant drop in 2024/25, when production fell to a 5-year low of 26.2 MMT due to lower yields.

Global Surplus Outlook and Market Sentiment

Sugar prices have been retreating over the past four months, with NY sugar hitting a 4.25-year low last month and London sugar sliding to a 4-year low. These declines have been driven by expectations of a global sugar surplus in the 2025/26 season. Czarnikow, a commodities trader, projected a 7.5 MMT global sugar surplus for the 2025/26 season, the largest in 8 years. The U.S. Department of Agriculture (USDA) also forecasted a +4.7% y/y increase in global sugar production to a record 189.318 MMT, with global ending stocks rising by 7.5% y/y to 41.188 MMT.

Despite this bearish outlook, there are signs that the recent price slide has sparked a pickup in demand. China's June sugar imports surged by 1,435% to 420,000 MT. Additionally, Coca-Cola has agreed to use cane sugar in its beverages sold in the U.S., which could boost U.S. sugar consumption by +4.4% to 11.5 MMT from 11 MMT currently.

Support from Reduced Brazilian Production

Brazil, the world's largest sugar producer, has seen reduced sugar production in the 2025/26 season. Unica reported that cumulative 2025/26 Brazil Center-South sugar output through mid-July fell by -9.2% y/y to 15.655 MMT. Last month, Conab, Brazil's government crop forecasting agency, noted that 2024/25 Brazil sugar production declined by -3.4% y/y to 44.118 MMT due to lower sugarcane yields caused by drought and excessive heat.

Thailand’s Growing Production Adds to Concerns

Thailand, the world's third-largest sugar producer and second-largest exporter, is also expected to see higher sugar production. On May 2, the Thailand Office of the Cane and Sugar Board reported that 2024/25 sugar production rose by +14% y/y to 10.00 MMT. This increase adds to concerns about global supply levels.

International Sugar Organization Adjusts Forecasts

The International Sugar Organization (ISO) raised its 2024/25 global sugar deficit forecast to a 9-year high of -5.47 MMT, up from a February forecast of -4.88 MMT. This adjustment indicates a tightening market following the 2023/24 global surplus of 1.31 MMT. ISO also revised its 2024/25 global sugar production forecast downward to 174.8 MMT from 175.5 MMT.

The USDA's bi-annual report released on May 22 projected that global 2025/26 sugar production would climb by +4.7% y/y to a record 189.318 MMT, with global human sugar consumption increasing by +1.4% y/y to 177.921 MMT. The USDA also forecasted that 2025/26 global sugar ending stocks would rise by +7.5% y/y to 41.188 MMT.

Future Outlook and Market Dynamics

The USDA's Foreign Agricultural Service (FAS) predicted that Brazil's 2025/26 sugar production would rise by +2.3% y/y to a record 44.7 MMT. FAS also forecasted that India's 2025/26 sugar production would increase by +25% y/y to 35.3 MMT, driven by favorable monsoon rains and expanded sugar acreage. Thailand's 2025/26 sugar production is expected to climb by +2% y/y to 10.3 MMT.

As market dynamics continue to evolve, investors and traders will be closely watching for any shifts in supply and demand trends that could influence sugar prices in the coming months.