Rising Crude Oil Prices Bolster Sugar's Market Gains
The global sugar market is gearing up for a substantial surplus in the upcoming 2025/26 season, according to recent forecasts. This surplus, estimated to be between 7.5 million to 9.3 million tonnes, is one of the largest in almost a decade.
The impending surplus can be attributed to a combination of record-high sugar production and relatively weaker consumption growth. Key contributors to this surplus include robust harvests, particularly in Brazil and India, and only modest consumption increases or even slight decreases.
Brazil's Centre-South (CS) region is projected to produce around 42 to 44.7 million tonnes of sugar, near or at record highs despite some weather challenges. India, on the other hand, is expected to rebound sharply after a poor previous season, with production rising about 25% to approximately 32-35.3 million tonnes. Thailand's sugar output is expected to grow modestly by around 2% to 10.3 million tonnes.
These projections result in total global sugar production nearing 186 to 189 million tonnes, making 2025/26 the second highest production year after 2017/18. However, global sugar consumption is expected to increase only marginally or even decline slightly compared to previous forecasts, with estimates around 177-178 million tonnes.
The large production surplus will lead to rebuilding global sugar stocks, reversing some of the stock drawdown since 2020. This adds downward pressure on prices, causing bearish market sentiment and low sugar prices amid expectations of ample supply and growing inventories.
As the 2025/26 season approaches, India may permit local sugar mills to export sugar, aiming to address the anticipated surplus. Strength in crude prices is also supporting gains in sugar.
Notably, the USDA forecasted that India's 2025/26 sugar production would rise +25% y/y to 35.3 MMT, while global sugar ending stocks for the same season are forecasted to be 41.188 MMT, up 7.5% y/y.
In summary, the global sugar market is bracing for a significant surplus in the 2025/26 season, primarily due to strong harvests, particularly in Brazil and India, combined with only modest consumption increases or even slight decreases. This imbalance is causing bearish market sentiment and low sugar prices amid expectations of ample supply and growing inventories.
Technology advances in agriculture could potentially optimize sugar production processes in Brazil and India, improving yields and reducing the impact of weather challenges. On the sports side, the extra sugar supply might stimulate a growth in the production of sports beverages due to their high sugar content.
