Global Sugar Glut Pulls London Sugar Prices Down to 5-Year Lows

The London sugar market is experiencing pronounced weakness, with London ICE white sugar #5 (SWH26) declining 7.20 cents (-1.78%) in March trading to reach a 5-year nearest-futures low. The New York world sugar #11 contract (SBH26) also retreated 0.21 cents (-1.46%) during the same session. This latest pullback reflects a broader three-month downward trend, with New York sugar hitting 3-month lows last Friday and London sugar prices extending their decline amid persistent concerns about oversupply in global sugar markets.

Brazil’s Record Production Floods Global Markets

Brazil’s dominance in world sugar production is intensifying downward price pressure on London sugar prices and across the broader commodity complex. Unica reported that Brazil’s cumulative 2025-26 Center-South sugar production through mid-January climbed 0.9% year-over-year to 40.236 million metric tons (MMT). More significantly, the allocation of cane for sugar production has shifted upward, with the sugar crush ratio reaching 50.78% in the 2025/26 season compared to 48.15% in the prior year, signaling producers’ strategic focus on sugar over ethanol.

Brazil’s crop forecasting agency Conab has raised production expectations further. In November, Conab increased its 2025/26 sugar production estimate to 45 MMT from 44.5 MMT previously, while consulting firm Safras & Mercado has cautioned that production momentum may not persist indefinitely. Safras & Mercado projects Brazil’s 2025/26 sugar output at 43.5 MMT with exports reaching 34 MMT, though the firm forecasts a decline to 41.8 MMT and 30 MMT exports respectively in 2026/27, representing a -3.91% year-over-year pullback.

India’s Export Surge Compounds Oversupply Pressures

India, the world’s second-largest sugar producer, is adding substantial supply to global markets despite domestic production volatility. The India Sugar Mill Association (ISMA) reported that India’s 2025-26 production from October 1 through mid-January reached 15.9 MMT, up 22% year-over-year. For the full season, ISMA has raised its 2025/26 production forecast to 31 MMT from 30 MMT initially, representing an 18.8% year-over-year increase.

The outlook for Indian exports is particularly notable for its bearish implications for London sugar prices. India’s food secretary signaled the government may permit additional sugar exports to alleviate domestic supply concerns, following the ministry’s November approval to allow mills to export 1.5 MMT during the 2025/26 season. Significantly, ISMA has cut its estimate for sugar destined for ethanol production to 3.4 MMT from a July projection of 5 MMT, freeing additional supply for export markets. This policy shift marks a reversal from India’s export quota system, which was implemented in 2022/23 after production shortfalls threatened domestic supplies.

Thailand and Global Production Surge

Thailand, the world’s third-largest sugar producer and second-largest exporter by volume, is also contributing to the production glut. The Thai Sugar Millers Corp projected in October that Thailand’s 2025/26 sugar crop will expand 5% year-over-year to 10.5 MMT, adding further competitive pressure to international markets and London sugar prices specifically.

Multiple Forecasters Project Sustained Global Surpluses

Market analysts and commodity traders across the industry are converging on expectations of persistent global sugar surpluses, a factor directly depressing London sugar prices and broader market sentiment. Czarnikow, a leading sugar trader, expects a global sugar surplus of 3.4 MMT in 2026/27 following an 8.3 MMT surplus in 2025/26. Earlier in the year, Czarnikow had boosted its 2025/26 global surplus estimate to 8.7 MMT, up 1.2 MMT from a September projection.

The International Sugar Organization (ISO) forecast a 1.625 million MT surplus in 2025-26, representing a significant reversal from a 2.916 million MT deficit in 2024-25. ISO projects global sugar production will rise 3.2% year-over-year to 181.8 million MT in 2025-26, driven by increased output in India, Thailand, and Pakistan. StoneX has independently projected a 2.9 MMT surplus for 2025/26, while Green Pool Commodity Specialists forecast a 2.74 MMT surplus for 2025/26 and a smaller 156,000 MT surplus for 2026/27.

Notably, Covrig Analytics had raised its 2025/26 global surplus estimate to 4.7 MMT in December, though the firm projects the surplus will moderate to 1.4 MMT in 2026/27 as weak prices discourage future production.

USDA Projects Record 2025-26 Production and Consumption

The U.S. Department of Agriculture’s bi-annual report released December 16 provided the most comprehensive outlook. USDA projects that global 2025/26 sugar production will reach a record 189.318 MMT, representing a 4.6% increase year-over-year. Human consumption is forecast to increase 1.4% year-over-year to a record 177.921 MMT. Crucially, global sugar ending stocks are projected to decline 2.9% to 41.188 MMT, suggesting that despite record production, carryover inventories will shrink.

USDA’s Foreign Agricultural Service has offered granular regional forecasts: Brazil’s 2025/26 production is projected to rise 2.3% to a record 44.7 MMT, India’s production is expected to surge 25% to 35.25 MMT driven by favorable monsoon rainfall and expanded sugar acreage, and Thailand’s output is projected to increase 2% to 10.25 MMT.

Fund Short Positions at Record Levels May Set Stage for Reversal

An intriguing counterpoint to the bearish production picture is the positioning of investment funds in sugar futures markets. The Commitment of Traders (COT) report for the week ended February 3 showed funds substantially increased their net short positions in New York world sugar futures and options, boosting short exposure by 57,104 contracts to reach a record 239,232 net short positions—the highest level recorded since the data series began in 2006. Such excessive short positioning could theoretically spark covering rallies, though the fundamental supply picture remains decisively bearish for London sugar prices.

Outlook: When Will London Sugar Find Support?

The convergence of record production forecasts, heightened export activity from India, and sustained output from Brazil and Thailand creates a structural supply surplus that continues to depress London sugar prices toward multi-year lows. While the record short positioning among funds presents the possibility of a technical bounce in London sugar prices, the underlying supply dynamics suggest any relief rallies would face significant headwinds. Producers are pivoting toward sugar output, export policies are being liberalized to clear domestic supply gluts, and consensus forecasts unanimously project continued surplus conditions through 2026/27. For London sugar price stabilization to occur, either demand must accelerate unexpectedly or production incentives must shift meaningfully—developments that currently appear unlikely in the near-term horizon.