Sugar Prices Drop as Brazil Boosts Production

Sugar Prices Remain Under Pressure Amid Global Production Surges

Sugar prices have experienced a slight decline today, with October New York (NY) world sugar #11 (SBV25) falling by -0.04 (-0.25%) and October London ICE white sugar #5 (SWV25) dropping by -1.00 (-0.19%). Despite this, the prices remain above the 5-week lows seen on Tuesday. The downward trend is largely attributed to increased sugar production in Brazil, which has been a key factor in pressuring global sugar markets.

Brazil’s Center-South sugar output for the first half of July saw a significant increase of +15% year-over-year (y/y), reaching 3.4 million metric tons (MMT). Additionally, the percentage of sugarcane being crushed for sugar has risen to 54%, compared to 50% during the same period last year. This shift toward more profitable sugar production over ethanol has contributed to the current bearish sentiment in the market.

Brazil's Sugar Output and Its Impact

The outlook for higher sugar production in Brazil remains negative for sugar prices. According to Datagro, dry weather conditions in the country have prompted sugar mills to increase their cane crushing activities, favoring sugar over ethanol. This shift is expected to further suppress prices as supply continues to rise.

Meanwhile, India is also set to play a major role in shaping the global sugar market. Bloomberg reported that India may allow local sugar mills to export sugar starting in the next season, which begins in October. This comes after abundant monsoon rains have led to a bumper sugar crop. As of August 4, cumulative monsoon rain in India reached 500.8 mm, which is 4% above normal. The Indian Sugar and Bio-energy Manufacturers Association has also requested permission to export 2 MMT of sugar in the 2025/26 season.

India, the world's second-largest sugar producer, is projected to see a +19% y/y increase in 2025/26 sugar production, reaching 35 MMT, according to the National Federation of Cooperative Sugar Factories. This follows a -17.5% y/y decline in 2024/25 to a 5-year low of 26.2 MMT.

Global Sugar Surplus and Market Outlook

The global sugar market is facing a potential surplus, which has driven prices down over the past four months. NY sugar fell to a 4.25-year low last month, while London sugar hit a 4-year low. These declines are fueled by expectations of a 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 USDA also released a biannual report projecting a +4.7% y/y increase in global sugar production to a record 189.318 MMT, with ending stocks rising by 7.5% y/y to 41.188 MMT.

Despite these challenges, there are signs of improved demand. China's June sugar imports surged by 1,435% to 420,000 MT, indicating a growing appetite for sugar. Additionally, Coca-Cola has agreed to use cane sugar in its US beverages instead of high-fructose corn syrup, which could boost US sugar consumption by +4.4% to 11.5 MMT from the current 11 MMT, according to Bloomberg Intelligence.

Other Factors Affecting the Market

Reduced sugar production in Brazil has provided some support to prices. Unica reported that cumulative 2025/26 Brazil Center-South sugar output through mid-July fell by -9.2% y/y to 15.655 MMT. Conab, Brazil's government crop forecasting agency, noted that 2024/25 sugar production fell by -3.4% y/y to 44.118 MMT due to lower sugarcane yields caused by drought and excessive heat.

Thailand, the world's third-largest sugar producer and second-largest exporter, also saw an increase in 2024/25 sugar production by +14% y/y to 10.00 MMT. This growth is another factor contributing to the bearish outlook for sugar prices.

International Sugar Organization's Forecast

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 suggests a tightening market following the 2023/24 global sugar surplus of 1.31 MMT. ISO also reduced its 2024/25 global sugar production forecast to 174.8 MMT from 175.5 MMT.

The USDA's bi-annual report highlighted a +4.7% y/y increase in global 2025/26 sugar production to a record 189.318 MMT, with global human sugar consumption expected to climb +1.4% y/y to 177.921 MMT. Brazil's 2025/26 sugar production is forecasted to rise by +2.3% y/y to 44.7 MMT, while India's is expected to jump by +25% y/y to 35.3 MMT. Thailand's production is also anticipated to increase by +2% y/y to 10.3 MMT.

Final Thoughts

As the global sugar market continues to navigate supply and demand dynamics, the outlook remains mixed. While factors such as increased production in Brazil and India are weighing on prices, there are signs of growing demand that could provide some support. Investors and traders will be closely watching future developments in the market.