Sugar Bears Keep Winning: Supply Glut Overshadows Price Recovery

Sugar just tried to bounce back—NY March contract up 0.34%, London white sugar up 0.60%—but here’s the catch: this rally is running out of steam fast.

The fundamental issue? A colossal supply swing. The International Sugar Organization just flipped from forecasting a 2.9M MT deficit in 2024-25 to predicting a 1.6M MT surplus in 2025-26. That’s an absurd 4.5M MT swing in just months. Sugar trader Czarnikow went even more bearish, bumping the 2025-26 surplus estimate to 8.7M MT—nearly triple ISO’s call.

Where’s all this sugar coming from?

Brazil (world’s #1 producer) is about to print a record 45M MT in 2025-26, up from 44.5M MT forecast. Their Center-South region crushed 2.068M MT of cane just in October’s second half, up 16.4% y/y. Cumulative output through October already sits at 38.085M MT.

India (world’s #2) is surging back from a brutal 5-year low. After a 17.5% y/y production collapse in 2024-25 to just 26.1M MT, monsoon rains 8% above normal are fueling a rebound. ISMA now forecasts 31M MT for 2025-26 (up from 30M MT), but some estimates climb as high as 34.9M MT—that’s 18-34% growth y/y.

Worse for bulls: India’s food ministry just capped sugar exports at 1.5M MT for 2025-26 (down from 2M MT), which could free up even more domestic cane for crushing as global supplies balloon.

Thailand (world’s #3 producer, #2 exporter) is also ramping up, with a +5% y/y production jump to 10.5M MT expected.

The USDA’s May forecast was apocalyptic: global production hits a record 189.3M MT (+4.7% y/y), while consumption only grows 1.4% y/y to 177.9M MT. Ending stocks would balloon 7.5% y/y to 41.188M MT.

On the demand side? Pretty much nothing. Ethanol pivot in India helps a bit (mills diverting cane for fuel), and Brazilian real weakness ($BRL hit 5-week lows) is propping up export incentives. But none of it’s enough to move the needle.

Bottom line: Sugar found support this week and prices are consolidating recent highs, but the setup screams “trap.” With global supplies about to turn from deficit to surplus across multiple forecasters, and record output from the Big Three producers, the path of least resistance is lower. This isn’t a rally—it’s a short squeeze before the real selling starts.