The sugar market is currently experiencing notable fluctuations as prices continue to decline. Both New York and London sugar futures have reached significant lows, attributed primarily to expectations of a global sugar surplus. According to recent reports, the USDA has projected that sugar production worldwide for the 2025/26 season will increase by 4.7% year-over-year, hitting a record 189.318 million metric tons. This surplus is anticipated to be 41.188 million metric tons, marking an increase of 7.5% from the previous year.
Despite the ongoing selloff in sugar prices, there has been a slight recovery observed in recent trading sessions. The uptick in London sugar prices can be credited to a rally in crude oil prices, which have risen to a one-and-a-half month high. This increase has prompted some market participants to cover their short positions in sugar futures. Moreover, higher crude oil prices are impacting ethanol prices, leading sugar mills to consider directing more sugarcane toward ethanol production. This shift could, in turn, reduce the overall supply of sugar available on the market.
India, the second-largest producer of sugar globally, is forecasting an increase in sugar production for the upcoming season. A report from India's National Federation of Cooperative Sugar Factories indicated that the country's sugar output for the 2025/26 season could rise by 19% year-over-year, reaching approximately 35 million metric tons. This forecast is bolstered by the anticipation of favorable rainfall, essential for boosting crop yields. The Indian monsoon, running from June through September, is expected to deliver above-average rainfall this year, further enhancing the likelihood of a robust sugar crop.
The increase in sugar production in various countries poses a bearish outlook for sugar prices. For instance, the USDA's Foreign Agricultural Service predicts a rise in Brazil's sugar production to a record high of 44.7 million metric tons for the 2025/26 season, representing a 2.3% increase year-over-year. Similarly, projections indicate that Thailand's sugar production will also rise, with expectations of a 2% increase to 10.3 million metric tons for the same period.
In contrast, the Indian government has recently announced that it would permit a limited export of sugar, restoring some access to global markets. This movement comes after previously enforcing restrictions to maintain adequate domestic supplies. However, the Indian Sugar Mills Association has warned that in the 2024/25 sugar season, production might fall significantly, potentially decreasing by 17.5% to reach a five-year low of 26.2 million metric tons.
The dynamics within Brazilian sugar production can provide essential insights into the global market. Reports indicate that Brazil's sugar production for the 2025/26 season decreased by 6.8% year-over-year, totaling approximately 2.408 million metric tons for the first half of May. Cumulative output through mid-May has shown a significant year-over-year decline of 22.7% to 3.989 million metric tons.
This reduction in Brazil's sugar production might create a supportive environment for sugar prices. The International Sugar Organization has also predicted a global sugar deficit for the 2024/25 season, warning of a nine-year high deficit of 5.47 million metric tons. This represents a tightening market compared to the previous year's surplus, emphasizing the complexities within global sugar supply and demand relationships.
Drought and extreme heat have posed challenges for sugar production in recent years, particularly in Brazil's top-producing state of São Paulo. Such environmental conditions have resulted in crop losses, with estimates suggesting as much as 5 million metric tons of sugarcane may have been compromised. Consequently, the national crop forecasting agency, Conab, anticipates a decline in Brazil's sugar output, projecting a decrease of 3.4% year-over-year for the 2024/25 season.
Looking beyond production, the USDA's biannual report outlines an optimistic view for sugar consumption, with expectations for human consumption to rise by 1.4% year-over-year. This trend could push consumption figures to a new high of 177.921 million metric tons. Additionally, global sugar ending stocks are expected to increase, reflecting an overall growing demand even in the face of potential supply surpluses.
In summary, the sugar market is currently navigating a complex environment characterized by significant shifts in production forecasts and price dynamics. The interplay between increased production in major sugar-producing countries and fluctuating demand will continue to influence pricing trends in the near future.
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