Brazil's Sugar Crunch Could Spark Next Rally—Here's What You Need to Know

Sugar prices just hit a 5-week high, and it’s not just random market noise. StoneX downgraded Brazil’s 2026/27 output forecast from 42.1 MMT to 41.5 MMT, triggering a sharp rally in both NY (#11) and London (#5) contracts. That might sound small, but in the commodity world, every million metric ton matters.

Here’s what’s actually moving the needle right now:

The Bull Case (Why Prices Are Rising)

Brazil, which produces roughly 30% of the world’s sugar, is showing signs of tighter supply. Their Center-South crushing data came in hotter than expected—crushing for sugar hit 46.02% in late October vs. 45.91% a year ago. Meanwhile, India’s government is eyeing a bold move: hiking ethanol prices to incentivize mills to pivot toward fuel production instead of sugar exports. Fewer exports from India = tighter global supply. India also capped its 2025/26 export quota at 1.5 MMT (down from earlier 2 MMT estimates), another supply-tightening signal.

The Bear Case (The Supply Tsunami)

But here’s the problem: almost everyone else is forecasting more sugar coming to market. The International Sugar Organization projects a 1.625 MMT surplus in 2025-26 (a 180-degree flip from a 2.916 MMT deficit in 2024-25). India’s sugar output is now expected to surge 18.8% y/y to 31 MMT (ISMA), with some forecasts as high as 34.9 MMT. Thailand (the world’s 2nd-largest exporter) is ramping up to 10.5 MMT, and Brazil’s total output is still tracking toward record 44.7-45 MMT.

The USDA expects global production to hit a record 189.3 MMT in 2025-26—a 4.7% jump y/y. Global stocks are also building, expected to rise 7.5% to 41.2 MMT.

The Bottom Line

We’re caught between a supply squeeze in the near term (Brazil production cuts, India export caps) and a structural surplus building for the full-year. The recent rally has merit given tighter 2026/27 supply, but the longer-term trend favors lower prices once this wave of new crop hits the market. Watch for India’s monsoon performance and Brazil’s actual crushing rates—they’ll be the real price drivers going forward.