Sugar Rally Sparked by Currency Move—What's Behind the Recent Price Surge?

March NY sugar futures surged +0.22 points (up 1.48%) and March London ICE white sugar climbed +4.30 points (up 1.01%) today. The rally marks a 2-week high for NY sugar and a 1-week peak for London sugar, leaving traders wondering what triggered this sharp move upward.

The answer lies in Brazil’s currency. A stronger Brazilian real against the dollar has sparked short covering activity in sugar futures—essentially traders closing out bearish positions as the economics shift. Here’s the connection: a stronger real makes Brazilian sugar less competitive for export, which reduces selling pressure from the world’s largest sugar producer. This relief from supply pressure is fueling the bounce.

Production Boom Is the Real Story

But the bigger picture tells a different tale. The past week has been brutal for sugar prices, which fell to 3-week lows just days ago. Two countries are flooding the market with increased output.

India’s surge is particularly dramatic. The India Sugar Mill Association reported that sugar production jumped +43% year-over-year in October-November to 4.11 million metric tons. By November 30, 428 mills were crushing cane—up from 376 a year ago. Looking ahead, ISMA raised its 2025/26 production forecast to 31 MMT from 30 MMT, reflecting an 18.8% year-over-year increase. The National Federation of Cooperative Sugar Factories projects India could reach 34.9 MMT this season, up 19% y/y, thanks to larger planted acreage and abundant monsoon rains (937.2mm, 8% above normal—the strongest rainfall in five years).

The catch? India’s food ministry limited sugar exports to 1.5 MMT for 2025/26, down from earlier expectations of 2 MMT. This quota system has been in place since 2022/23 to protect domestic supplies.

Brazil isn’t far behind. Conab, Brazil’s crop forecasting agency, raised its 2025/26 production estimate to 45 MMT from 44.5 MMT. Through mid-November, Center-South sugar output rose +8.7% year-over-year to 983 MT, with cumulative production climbing +2.1% y/y to 39.179 MMT. The USDA’s Foreign Agricultural Service predicts Brazil will hit a record 44.7 MMT, up 2.3% y/y.

Thailand rounds out the trio. The Thai Sugar Millers Corp projects 2025/26 production will reach 10.5 MMT, up 5% y/y. Thailand, the world’s third-largest producer and second-largest exporter, matters significantly for global supply dynamics.

The Surplus Problem

All this production is creating a massive glut. The International Sugar Organization forecasted a 1.625 million MT surplus for 2025-26, a sharp turnaround from a 2.916 million MT deficit in 2024-25. ISO is calling for global production to rise +3.2% y/y to 181.8 MMT, while consumption climbs only 1.4% to 177.921 MMT.

Czarnikow, a major sugar trader, is even more bearish—boosting its 2025/26 global surplus estimate to 8.7 MMT, up 1.2 MMT from its September forecast of 7.5 MMT.

What It Means

Today’s rally, while eye-catching, masks an underlying bearish setup. The Brazilian real strength provided a brief respite through short covering—traders exiting bearish bets—but the structural reality remains: abundant supplies from India, Brazil, and Thailand are weighing on prices long-term. The monsoon strength and expanded acreage suggest sustained production pressure ahead.