Global Sugar Market Confronts Its Mounting Oversupply Challenge

The world’s sugar prices face relentless downward pressure as mounting production forecasts and expanding global surpluses reshape market dynamics. March New York sugar #11 futures recently tumbled to 2.5-month lows, while London ICE white sugar #5 dipped to 5-year lows, reflecting the bearish sentiment gripping the sector. Multiple commodity forecasters and agricultural organizations are now converging on a troubling consensus: the 2025-26 season will likely see substantial global oversupply, and its impact on pricing could persist for quarters ahead.

The Surplus Outlook Deepens the Downturn

Commodity analysts are increasingly alarmed by the magnitude of projected global sugar surpluses. Green Pool Commodity Specialists projects a 2.74 million metric ton (MMT) global surplus for 2025/26, with another 156,000 MT surplus expected in 2026/27. Meanwhile, StoneX forecasts an even larger 2.9 MMT surplus in 2025/26. The disparities between forecasters highlight the uncertainty, but the directional consensus remains unmistakably bearish for prices. Covrig Analytics initially raised its 2025/26 surplus estimate to 4.7 MMT before moderating to recognize that production headwinds could limit surpluses in subsequent years.

The International Sugar Organization (ISO) pegged the 2025-26 surplus at 1.625 MMT following a 2.916 MMT deficit in the prior season—a significant swing toward oversupply. Sugar trader Czarnikow painted an even more dire picture, boosting its 2025/26 surplus estimate to 8.7 MMT, signaling that its projections reflect the most aggressive production assumptions in the market. The USDA’s December forecast reinforced this pessimism, predicting global 2025/26 production would climb 4.6% year-over-year to a record 189.318 MMT, while consumption would rise only 1.4% to 177.921 MMT—a classic supply-demand mismatch.

Brazil’s Sugar Production Surge Pressures Prices

Brazil, the world’s largest sugar producer, is ramping up output at an accelerating pace. Conab, Brazil’s official crop forecasting agency, raised its 2025/26 production estimate to 45 MMT, a record high that reflects farmers’ determination to capitalize on prior years’ pricing strength. Unica reported that Brazil’s cumulative 2025-26 Center-South sugar output through December rose 0.9% year-over-year to 40.222 MMT. Critically, the ratio of sugarcane crushed for sugar (rather than ethanol) increased to 50.82% from 48.16%, signaling that its prioritization of sugar over biofuel production is intensifying supply pressures.

The USDA’s Foreign Agricultural Service (FAS) projected Brazil’s 2025/26 production at 44.7 MMT, representing 2.3% growth year-over-year. However, looking ahead, consulting firm Safras & Mercado offered a glimmer of hope, forecasting that Brazil’s 2026/27 sugar production will contract 3.91% to 41.8 MMT. If this materializes, it could provide price support in subsequent seasons, though its timing may come too late to prevent near-term suffering.

India Unleashes Record Sugar Output and Export Ambitions

India, the world’s second-largest producer, is experiencing an unprecedented surge in production that will reshape global export dynamics. The India Sugar Mill Association (ISMA) reported that output through mid-January 2025/26 reached 15.9 MMT, up 22% year-over-year. ISMA subsequently raised its full-season forecast to 31 MMT from an earlier 30 MMT estimate, representing 18.8% year-over-year growth. The FAS pegged production even higher at 35.25 MMT, driven by favorable monsoon rains and expanded acreage.

Equally significant is India’s pivotal role in global sugar trade. The nation’s food ministry has signaled willingness to permit additional sugar exports in the 2025/26 season to alleviate domestic supply gluts. After introducing a quota system in 2022/23 following supply constraints, India now finds itself in the opposite position—oversupply. The government authorized 1.5 MMT of sugar exports, and its liberalization of export policies could further depress global prices as Indian sugar floods international markets. ISMA also cut its estimate for sugar dedicated to ethanol production from 5 MMT to 3.4 MMT, freeing additional supplies for export.

Thailand and Its Contribution to Global Glut

Thailand, the world’s third-largest producer and second-largest exporter, is also ramping up output. The Thai Sugar Millers Corp projected a 5% increase in the 2025/26 crop to 10.5 MMT, signaling that its export volumes could climb as well. The USDA’s FAS modestly forecast Thai production at 10.25 MMT with 2% year-over-year growth. ISO cited Thailand alongside Pakistan as countries driving the broader surplus dynamic, reinforcing that its sustained production growth is compounding market imbalances.

Market Rebalancing Mechanisms May Provide Relief

While the near-term outlook remains decidedly negative, structural factors could eventually stabilize the market. Covrig Analytics projects that the 2026/27 global surplus will narrow substantially to 1.4 MMT, as weak prices discourage growers from planting additional acreage. Historical patterns suggest that sustained price weakness will eventually curtail production investment, creating the conditions for market rebalancing.

The USDA forecasts global ending stocks for 2025/26 will decline 2.9% year-over-year to 41.188 MMT, indicating that despite record production, its cumulative surplus cannot indefinitely expand. Safras & Mercado’s projection of an 11% decline in Brazil’s 2026/27 sugar exports to 30 MMT signals that production cycles are shifting. These developments suggest that prices, while pressured today, may find support once current surplus dynamics play out through inventory accumulation and eventual demand absorption.

For now, however, sugar traders and producers face an uncomfortable reality: a multi-year cycle of oversupply driven by production surge in major exporters, its dampening effect on prices, and the lag before market forces rebalance supply and demand.