Global Sugar Market Faces Supply Surge: Barchart's Analysis of Recent Price Movements and Production Forecasts

Recent sessions have seen sugar prices edge higher, with NY March sugar #11 (SBH26) climbing +0.14 (+0.95%) and London ICE white sugar #5 (SWH26) rising +1.10 (+0.27%). According to barchart’s commodity tracking, this upside has been driven by a sharp rally in the Brazilian real to 20-month highs, which sparked short-covering activity among traders and dampened export incentives from Brazil’s major sugar producers.

Brazilian Real’s Strength Triggers Short Covering in Sugar Futures

The stronger Brazilian currency has created an interesting market dynamic. When the real appreciates, sugar exports become less profitable for Brazilian producers in local currency terms, discouraging immediate selling. This supply-side shift has prompted speculators to cover short positions, providing temporary price support. However, this bounce masks a more fundamental challenge facing the sugar market: rapidly expanding global production.

Sugar Production Surge: A Closer Look at Major Producing Regions

The supply picture tells a more complicated story than recent price action suggests. Brazil’s cumulative 2025-26 Center-South sugar output through December reached 40.222 MMT, up 0.9% year-over-year, with sugar cane crushed for sugar rising to 50.82% in 2025/26 from 48.16% in the prior season—a shift indicating producers are prioritizing sugar over ethanol.

India’s production trajectory appears even more aggressive. The India Sugar Mill Association reported that October 1-January 15 output surged 22% year-over-year to 15.9 MMT. More significantly, ISMA raised its full-year 2025/26 production forecast to 31 MMT from 30 MMT in November, representing an 18.8% increase year-over-year. Critically, ISMA also cut its ethanol production estimate to 3.4 MMT from 5 MMT, meaning additional volumes could be available for export—a bearish signal for global prices.

Thailand, the world’s third-largest producer and second-largest exporter, is also ramping up. The Thai Sugar Millers Corp projected a 5% increase to 10.5 MMT in the 2025/26 season.

Competing Forecasts: The Surplus Debate

Different organizations are painting varying pictures of global sugar balances. The International Sugar Organization projected a 1.625 million MT surplus for 2025-26, driven by increased production from India, Thailand, and Pakistan, with global output climbing 3.2% year-over-year to 181.8 million MT.

Sugar trader Czarnikow painted an even more pessimistic supply picture, raising its 2025/26 global surplus estimate to 8.7 MMT in November. Covrig Analytics similarly elevated its surplus forecast to 4.7 MMT in mid-December.

The USDA’s December report presented similar conclusions, projecting global 2025-26 sugar production would surge 4.6% year-over-year to a record 189.318 MMT, while consumption would increase just 1.4% to 177.921 MMT. The agency expects global ending stocks to fall 2.9% to 41.188 MMT—a mild decline given production growth.

India’s Export Policy: A Major Market Wildcard

A lesser-discussed but equally important factor is India’s evolving export policy. India’s food ministry authorized 1.5 MMT of sugar exports in the 2025/26 season after domestic supplies grew too large. This marks a significant shift from the export quota system introduced in 2022/23, which had previously restricted shipments. With ISMA reducing its ethanol-use forecast, India could become a more aggressive exporter, adding pressure to global prices.

The Long-Term Supply Picture: Light at the End of the Tunnel

While current supply conditions appear bearish, a potential inflection point looms. Brazil’s production surge may prove temporary. Safras & Mercado forecast that Brazil’s 2026/27 sugar output will fall 3.91% to 41.8 MMT from the expected 43.5 MMT in 2025/26, with exports declining 11% year-over-year to 30 MMT. Meanwhile, Covrig projects the global surplus will compress to just 1.4 MMT in 2026/27 as weak prices discourage fresh production increases.

This combination of near-term supply abundance and potential medium-term tightening creates an interesting dynamic for traders. Short-term headwinds from record production are colliding with structural constraints emerging beyond the current season. For barchart commodity analysts tracking the sugar #5 contract and broader market trends, the next 12 months may prove pivotal in determining whether prices can stabilize amid the current surplus or if further weakness lies ahead.