Global Sugar Market Tightens as Major Producers Ramp Up Output

Index Rebalancing Fuels Near-Term Rally

Sugar futures markets experienced a significant upswing this week, with New York world sugar #11 (SBH26) March contracts climbing 0.08 points (0.53%), while London ICE white sugar #5 (SWH26) March delivery rose 2.00 points (0.47%). This week’s momentum pushed prices to their highest levels in seven days, marking the strongest performance in recent trading sessions.

The upward pressure stems primarily from anticipated index-driven capital flows. Citigroup estimates that two major commodity benchmarks—BCOM and S&P GSCI—will direct approximately $1.2 billion into sugar futures markets over the coming week as part of their scheduled annual rebalancing. This mechanical buying has provided substantial support to sentiment.

Brazil: Strong Output Despite Weaker Export Outlook

Brazil, the world’s largest sugar producer, presents a complex picture. The country’s currency dynamics have added nuance to market sentiment, with the Brazilian real appreciating to its strongest level against the US dollar in recent weeks. A firmer real typically discourages exporters from selling into international markets, potentially constraining global supply availability.

However, production trends paint a different narrative. Brazil’s crop agency Conab raised its 2025/26 production estimate to 45 MMT in November, up from the previous 44.5 MMT projection. Center-South region cumulative production through November reached 39.904 MMT, representing a 1.1% year-over-year increase. The proportion of sugarcane directed toward sugar production (rather than ethanol) climbed to 51.12% in the current season versus 48.34% previously.

Yet lookahead forecasts suggest caution. For the 2026/27 season, output is anticipated to decline to 41.8 MMT, representing a 3.91% decrease from the 43.5 MMT expected for 2025/26. Sugar exports are projected to fall 11% year-over-year to 30 MMT in 2026/27, signaling potential supply tightness ahead.

India’s Sugar Production Growth and Export Expansion

India’s sugar production trajectory has emerged as a critical market variable. As the world’s second-largest producer, shifts in Indian output and policy directly influence global pricing dynamics.

Recent data reveals substantial production momentum. The India Sugar Mill Association (ISMA) reported that production from October 1 through December 31 in the 2025-26 season reached 11.90 MMT, marking a 25% year-over-year surge from 9.54 MMT in the comparable prior-year period. This strength has prompted ISMA to raise its full-season 2025/26 production estimate to 31 MMT, representing an 18.8% increase versus the previous year.

Beyond raw production numbers, policy shifts are reshaping export availability. India’s food ministry approved 1.5 MMT of sugar exports during the 2025/26 season through its quota system—maintained since 2022/23 when production declined due to late-season rainfall. ISMA simultaneously reduced its forecast for sugarcane allocated to ethanol production to 3.4 MMT from the prior estimate of 5 MMT, freeing additional supply for commercial export.

The prospect of increased sugar production in India combined with relaxed export quotas has weighed on global prices, particularly as government officials signaled potential authorization for additional shipments beyond official allocations to manage domestic surplus conditions.

Thailand and Wider Supply Expansion

Thailand, ranking as the third-largest global producer and second-largest exporter, is also expected to contribute to supply growth. The Thai Sugar Millers Corp projected a 5% year-over-year expansion to 10.5 MMT for the 2025/26 crop as of October 1.

Global Balance Sheet and Outlook

The International Sugar Organization (ISO) forecasted on November 17 that the global market will shift from a 2024-25 deficit of 2.916 million MT to a surplus of 1.625 million MT in 2025-26. Commodity trader Czarnikow offered an even larger surplus estimate, raising its 2025/26 projection to 8.7 MMT versus 7.5 MMT predicted in September.

According to the USDA’s December 16 bi-annual report, global sugar production for 2025/26 is projected to reach a record 189.318 MMT, reflecting a 4.6% year-over-year increase. Global human consumption is forecast to reach a new peak at 177.921 MMT (up 1.4%), while ending stocks are anticipated to contract by 2.9% to 41.188 MMT.

The USDA’s projections highlight divergent regional trends: Brazil’s output is seen rising 2.3% to 44.7 MMT, India’s production is expected to jump 25% to 35.25 MMT supported by favorable weather and expanded acreage, and Thailand’s output is forecast to climb 2% to 10.25 MMT.

Market Takeaway

The current sugar market environment reflects tension between near-term commodity index flows supporting prices and longer-term production dynamics—particularly robust expansion in sugar production in India alongside increases from Brazil and Thailand—that threaten to perpetuate surplus conditions into 2025/26.