Global Sugar Market Faces Significant Headwinds as Major Producers Ramp Up Output

The sugar market took a decisive turn lower on Thursday as traders priced in the likelihood of expanded shipments from India, the world’s second-largest sugar producer. March contracts in New York retreated 0.28 cents to close 1.90% lower, while London’s white sugar benchmark fell 1.52% on the day. The selloff reflects growing concerns about a shifting supply-demand balance, with multiple production forecasts pointing toward a substantially larger crop year ahead.

Indian Sugar Exports Set to Expand

India’s food ministry signaled its willingness to permit additional sugar exports beyond current quotas as domestic inventories swell beyond comfortable levels. The government had previously authorized 1.5 million metric tons of exports for the 2025/26 season—a reversal from the export quotas introduced in 2022/23 when late monsoon rains had constrained production and tightened local supplies.

Production data underscores why New Delhi is considering relaxing export restrictions. The India Sugar Mill Association reported that output from October through mid-December surged 28% year-over-year to 7.83 million metric tons. Looking ahead, the ISMA has raised its 2025/26 production forecast to 31 million metric tons from an earlier 30 million ton estimate, representing an 18.8% increase from last year. The association concurrently trimmed its ethanol-for-fuel projection to 3.4 million metric tons from a July estimate of 5 million metric tons, creating additional surplus sugar available for export channels.

Industry projections point toward even more dramatic supply expansion. India’s National Federation of Cooperative Sugar Factories forecasts 2025/26 output climbing 19% year-over-year to 34.9 million metric tons, driven by expanded planting acreage across cane-growing regions. This recovery marks a sharp turnaround from 2024/25, when production declined 17.5% year-over-year to a five-year low of 26.1 million metric tons.

Brazilian Output Continues Higher Trajectory

Brazil, the world’s dominant sugar supplier, is also contributing to market pressure. The Brazilian real weakened to a 4.5-month low against the dollar, encouraging Brazilian mills to accelerate export sales at current price levels. Conab, Brazil’s agricultural forecasting authority, recently lifted its 2025/26 production estimate to 45 million metric tons from a previous projection of 44.5 million metric tons. Unica, the industry association, reported that cumulative Center-South sugar output through November reached 39.904 million metric tons, up 1.1% from the prior year.

Processing metrics reveal intensifying focus on sugar rather than ethanol. The percentage of cane directed toward sugar production rose to 51.12% in 2025/26 from 48.34% the prior year, signaling mill operators’ confidence in sugar market dynamics relative to fuel alcohol alternatives.

Third-Major Producer Also Raising Estimates

Thailand, ranking third globally and second among exporters, is likewise expected to expand its footprint. The Thai Sugar Millers Corporation projected 2025/26 production increasing 5% year-over-year to 10.5 million metric tons. The USDA’s Foreign Agricultural Service estimated Thai 2025/26 output at 10.25 million metric tons, up 2% year-over-year.

International Organizations Sound the Supply-Surplus Alarm

The International Sugar Organization fundamentally shifted its market outlook in mid-November, projecting a 1.625 million metric ton global surplus for 2025/26 following a 2.916 million metric ton deficit the prior year. This reversal is attributable to increased production across India, Thailand, and Pakistan. Just three months earlier in August, ISO had forecast a modest 231,000 metric ton deficit for the same marketing year—a dramatic reassessment of market direction.

ISO is forecasting global sugar production expanding 3.2% year-over-year to 181.8 million metric tons in 2025/26. Sugar trader Czarnikow independently boosted its surplus projection to 8.7 million metric tons, up 1.2 million metric tons from a September estimate of 7.5 million metric tons.

USDA Underscores Scale of Supply Challenge

The U.S. Department of Agriculture, in its biannual commodity forecast released this week, portrayed an even more expansive supply environment. The USDA projects global 2025/26 sugar production climbing 4.6% year-over-year to a record 189.318 million metric tons, against anticipated human consumption growth of just 1.4% year-over-year to 177.921 million metric tons. Global sugar ending stocks are forecast to fall 2.9% year-over-year to 41.188 million metric tons—a decline that reflects the beginning-of-year adequacy even as incremental supplies enter the market.

The USDA’s Foreign Agricultural Service specifically raised its Brazil estimate to 44.7 million metric tons for 2025/26, representing 2.3% year-over-year growth. For Indian sugar, FAS projects 2025/26 production surging 25% year-over-year to 35.25 million metric tons, citing beneficial monsoon precipitation and expanded acreage allocation.

Market Implications

The convergence of bullish production signals from multiple forecasters has created a bearish fundamental backdrop for price participants. With three of the world’s four largest producers all raising output expectations, and international organizations shifting from deficit to surplus projections, the structural bias for prices remains decidedly lower until consumption patterns or planting intentions shift materially.