Global Sugar Oversupply Pressures Market, Sending Prices to Multi-Year Lows

The commodity markets are flashing warning signals for sugar, as a wave of production growth across major-producing nations threatens to flood global markets with excess supply. New York’s March sugar futures contract fell -2.93% on recent trading, while London ICE white sugar declined -1.72%, with prices now at their lowest levels in 2.5 months and 5 years respectively. The fundamental driver behind this decline is straightforward: the world is about to produce significantly more sugar than it can consume, creating bearish conditions that have intensified throughout this quarter.

Forecasters are increasingly synchronized in their warnings about mounting oversupply. The recent projections paint a sobering picture for traders betting on higher prices. Green Pool Commodity Specialists anticipates a global sugar surplus of 2.74 million metric tons (MMT) for the 2025/26 season, with another 156,000 MT surplus expected the following year. Meanwhile, StoneX’s analysis suggests an even tighter market, predicting a 2.9 MMT surplus for 2025/26. Not to be outdone, Czarnikow—a major commodity trader—raised its estimate to 8.7 MMT, suggesting some institutions see the imbalance as more severe than others. These diverging projections highlight the uncertainty gripping the market, yet all point in the same direction: downward pressure on prices.

India’s Sugar Boom and Export Ambitions

India stands at the center of this production surge. The country’s sugar mills have ramped up output dramatically, with the India Sugar Mill Association reporting a +22% year-over-year increase through mid-January 2026, reaching 15.9 MMT. The ISMA further boosted its full-season estimate to 31 MMT—an +18.8% jump compared to the prior year. What makes this particularly significant for global sugar dynamics is New Delhi’s shifting policy stance. After years of restricting exports through quota systems implemented during prior supply crises, the government has signaled willingness to permit additional exports, with the food ministry clearing 1.5 MMT of sugar shipments for the 2025/26 season. This policy reversal, aimed at clearing domestic inventory buildup, is expected to inject substantial volumes into global markets.

Adding to the supportive tailwinds for Indian production, the ISMA cut its forecast for sugar diverted to ethanol production from 5 MMT to 3.4 MMT, suggesting more sugar will be channeled toward export rather than fuel conversion. India ranks as the world’s second-largest producer, making these policy decisions and production shifts critical factors influencing international price dynamics.

Brazil and Thailand Extend Output Records

Brazil, the global leader in sugar production, is also amplifying supply pressures. Conab, Brazil’s official crop-forecasting agency, raised its 2025/26 production estimate to 45 MMT in November, up from a prior forecast of 44.5 MMT. More dramatically, the ratio of sugarcane crushed for sugar production—as opposed to ethanol—climbed to 50.82% in the current cycle versus 48.16% a year earlier, according to Unica’s December report. This shift toward sugar production over fuel indicates producers are responding to stronger price incentives in the sugar market relative to ethanol.

Thailand, the world’s third-largest producer and second-largest exporter, is similarly ramping output. The Thai Sugar Millers Corp projects a +5% year-over-year production increase to 10.5 MMT for the 2025/26 season, maintaining robust export activity that will add competitive pressure in international markets.

USDA Paints Picture of Record Production Against Modest Demand Growth

The U.S. Department of Agriculture’s December 16 assessment provides perhaps the most comprehensive outlook on sugar balance sheets. The USDA projects global sugar production will climb +4.6% year-over-year to a record 189.318 MMT for 2025/26, while human consumption is expected to rise only +1.4% year-over-year to 177.921 MMT. This significant production-to-demand gap underscores the structural imbalance facing markets. The USDA also forecasts that global ending stocks will decline by -2.9% to 41.188 MMT—a modest reduction that fails to absorb the incoming production surge.

The USDA’s Foreign Agricultural Service broke down regional production outlooks: Brazil’s output is expected to hit a record 44.7 MMT (+2.3% y/y), India’s production is projected at 35.25 MMT (+25% y/y driven by favorable monsoon conditions), and Thailand’s output is forecast at 10.25 MMT (+2% y/y). Combined, these three nations account for nearly half of global production, making their collective output decisions paramount for price trajectories.

Looking Ahead: Some Bright Spots Amid Headwinds

Not all signals are uniformly bearish. Safras & Mercado, a Brazilian consulting firm, projects that Brazil’s sugar production will contract by -3.91% to 41.8 MMT in 2026/27 from the expected 43.5 MMT in the current season. The firm similarly expects Brazilian sugar exports to drop -11% year-over-year to 30 MMT. This production pullback, driven partly by anticipated weaker prices discouraging expanded plantings, suggests relief could eventually arrive if current downward pressure persists.

Covrig Analytics initially forecasted a more severe 4.7 MMT global surplus for 2025/26 but projected the 2026/27 surplus will moderate to just 1.4 MMT as subdued prices discourage additional production investment. Meanwhile, the International Sugar Organization took a more conservative stance in November, forecasting just a 1.625 MMT surplus for 2025/26 following the prior year’s deficit of 2.916 MMT, suggesting some institutions foresee tighter conditions than consensus estimates imply.

These diverging outlooks underscore the complexity of global sugar markets, where multiple production centers, evolving export policies, and competing forecasting models create an intricate landscape. For now, the weight of available evidence points toward a prolonged period of oversupply that will continue testing prices until market-clearing adjustments realign supply with demand expectations.