Sugar Bounces on Fund Positioning Amid Mounting Global Production Pressure

March New York sugar #11 futures ([SBH26]( climbed +0.32 points (+2.21%) today, while March London ICE white sugar #5 ([SWH26]( advanced +9.00 points (+2.16%). The rally is driven by technical short covering as fund managers unwind bearish bets ahead of the year-end holiday season, when trading volumes typically thin and liquidity dries up.

However, this near-term bounce masks a deeper structural headwind: a wave of production forecasts from major sugar-exporting regions is painting a picture of significant oversupply through 2026.

India’s Record Crop Signals Export Surge

The largest bearish catalyst came from India, where production estimates have been repeatedly raised. The India Sugar Mill Association (ISMA) projects 2025/26 output of 31 MMT, up 18.8% year-over-year, after reporting that October-to-December production already jumped 28% y/y to 7.83 MMT. Some forecasters are even more bullish: the National Federation of Cooperative Sugar Factories pegged India’s 2025/26 output at 34.9 MMT, a 19% year-over-year increase.

This production bounce follows a 17.5% production decline in 2024/25, when output fell to a 5-year low of 26.1 MMT. The recovery is being fueled by favorable monsoon rainfall and increased planted acreage.

Critically, India’s government may permit additional sugar exports to manage a domestic supply glut. The food ministry already authorized 1.5 MMT of exports in the 2025/26 season. If authorities lift quotas further, India—the world’s second-largest producer—could become a major source of export supply, weighing on global prices.

Adding to this, the ISMA reduced its forecast for sugar used in ethanol production to 3.4 MMT from 5 MMT, freeing up more cane for crystalline sugar exports.

Brazil Heading Toward Record Production

Brazil’s 2025/26 sugar crop is also expanding. Conab raised its forecast to 45 MMT in November from 44.5 MMT previously. Year-to-date, Center-South region output through November stood at 39.904 MMT, up 1.1% y/y. The sugar yield rate jumped to 51.12% of crushed cane in 2025/26 versus 48.34% in 2024/25, signaling higher production efficiency.

The USDA’s Foreign Agricultural Service projects Brazil will produce 44.7 MMT in 2025/26, a 2.3% year-over-year increase and a record level.

Thailand and Global Oversupply Concerns

Thailand, the world’s third-largest producer and second-largest exporter, is also ramping up. The Thai Sugar Millers Corp projects a 5% year-over-year increase to 10.5 MMT in 2025/26. The USDA forecasts 10.25 MMT, a 2% rise.

When combined with rising production in Pakistan and other regions, this supply surge has triggered alarming demand-supply projections.

Supply-Demand Math Turns Sharply Negative

The International Sugar Organization (ISO) forecasts a 1.625 million MT surplus for 2025/26—a stark reversal from the 2.916 million MT deficit in 2024/25. In August, ISO had predicted only a small 231,000 MT deficit. The organization now expects global production to rise 3.2% y/y to 181.8 MMT, while consumption climbs just 1.4% y/y to 177.921 MMT.

Private trader Czarnikow has an even grimmer view, projecting an 8.7 MMT global surplus for 2025/26, up from 7.5 MMT forecast in September.

The USDA, in its latest bi-annual report, projects global ending stocks will fall only modestly by 2.9% to 41.188 MMT—but against a backdrop of record production and near-record consumption, the math signals prolonged downward pressure on prices.

The Short-Term Rally vs. Long-Term Trend

Today’s short covering bounce offers traders a tactical opportunity, but the fundamental backdrop remains decidedly bearish. Unless rainfall patterns shift dramatically or unexpected disruptions emerge in major producing regions, sugar prices face headwinds through the 2025/26 season as global markets absorb a structural surplus.