Sugar Market Retreats as Long Positions Unwind Amid Supply Forecasts

March NY sugar futures (#SBH26) slipped -0.11 points (-0.72%) as traders offloaded long positions following a significant rally earlier in the week. Meanwhile, London ICE white sugar #5 (#SWH26) closed +3.30 points (+0.76%) on Wednesday, though the UK market remained closed Friday due to holiday breaks.

Production Surge in Major Exporting Nations Pressures Prices

The recent pullback reflects mounting supply concerns from the world’s largest sugar producers. After rallying on Tuesday following Safras & Mercado’s forecast of a 3.91% decline in Brazil’s 2026/27 output to 41.8 MMT, prices ran into resistance as traders assessed longer-term implications of expanded production elsewhere.

India’s production trajectory remains expansionary despite export controls. The India Sugar Mill Association raised its 2025/26 production forecast to 31 MMT (up 18.8% year-over-year) from 30 MMT previously, while actual crush data through mid-December jumped 28% year-over-year to 7.83 MMT. The government’s signal of potential additional sugar export allowances—beyond the current 1.5 MMT quota for 2025/26—has undercut prices as traders anticipate increased global supply pressure.

Thailand, the world’s third-largest producer and second-largest exporter, projects a 5% increase in its 2025/26 crop to 10.5 MMT, adding further headwinds. Brazil, despite near-term production declines forecast by some analysts, still shows robust output with Conab projecting 2025/26 production at 45 MMT. The Center-South region reported cumulative output of 39.904 MMT through November, up 1.1% year-over-year, with crushing ratios favoring sugar production over ethanol.

Global Surplus Outlook Weighs on Market

The International Sugar Organization forecasted a 1.625 million MT surplus for 2025-26, reversing the prior year’s 2.916 million MT deficit. The organization expects global production to rise 3.2% year-over-year to 181.8 million MT. Sugar trader Czarnikow’s more aggressive forecast projects an 8.7 MMT global surplus, suggesting significant downward pressure on prices.

The USDA’s December forecast painted an even larger picture: global 2025/26 production climbing 4.6% year-over-year to a record 189.318 MMT against consumption growth of just 1.4% to 177.921 MMT. Brazil’s output could reach a record 44.7 MMT, while India’s production may surge 25% year-over-year to 35.25 MMT, driven by monsoon benefits and expanded acreage.

With ending stocks projected to fall just 2.9% year-over-year to 41.188 MMT—insufficient to absorb the surplus—the market’s struggle to sustain recent gains reflects rational reassessment of fundamentals. The long liquidation pressure today exemplifies traders’ acknowledgment that supply fundamentals remain decidedly bearish for sugar into 2026.