Global supply increases pressure on sugar prices

Raw sugar started the year at 19,5 cents per pound, peaking in February, amid deteriorating prospects for India's 2024/25 crop and growing concerns about Brazil's Center-South performance in 2025/26. However, prices have since retreated as Brazilian production has proven more resilient. According to Hedgepoint's market intelligence coordinator, Lívea Coda, despite challenges such as lower-than-expected cane yields and quality, Brazilian crushing is expected to exceed 600 Mt, a solid result compared to previous harvests, especially when combined with a record sugar mix.

"This result, coupled with favorable conditions for the 2025/26 harvest in the Northern Hemisphere, led to a market adjustment. Prices stabilized around 16,5 cents/lb, reflecting expectations of increased supply compared to previous harvests. However, persistent global demand for sugar prevented prices from remaining at the June low of 15,5 cents/lb," he explains.

The analyst notes that during June, speculation intensified about a possible diversion of ethanol in Brazil's Center-South region. However, sugar prices remained attractive, especially in the major producing states of São Paulo and Minas Gerais, which continued to drive the sugar mix to exceptionally high levels, mitigating any significant risk of mix reductions.

At 15,5 cents/lb, Chinese demand returned to the market, positioning China as the main buyer of Brazilian sugar during May, June, and July. With arbitrage opportunities open, China strategically increased its inventories, taking advantage of the period's surplus, despite having had a year of strong domestic production.

"We expect trade flows to remain bearish, with a projected surplus exceeding 2,5 Mt between the third quarter of 2025 and the third quarter of 2026. While seasonal factors, such as the off-season in Brazil and low domestic ethanol stocks, may offer some support to prices, the projected surplus between the third and fourth quarters of 2025 will likely dampen any significant price recovery momentum that may occur in early 2026," it says.

Additional pressure comes from increased global availability, particularly from countries like India, where export volumes could increase substantially depending on government decisions—note that 2 Mt has already been ordered. This reinforces a bearish outlook for sugar.

However, according to the analyst, this doesn't mean prices will fall abruptly or reach parity with ethanol. It simply suggests that a significant recovery, such as breaching the 20 cents/lb threshold, seems unlikely in the short term. "A strong price recovery would likely require weather-related disruptions or significant changes in fundamentals, either on the supply or demand side, to alter the current trajectory. For now, we don't expect significant changes," she states.

Brazil NNE

Sugar production for the 2024/25 crop year (April-March) reached 3,75 Mt, driven by the crushing of approximately 58,4 Mt of sugarcane. This was achieved with an ATR of 132 kg/ton and a sugar blend of 51%. "Looking ahead to 2025/26, a Hedgepoint survey of producers in the Northeast region indicates a projected sugarcane crushing of 60,6 Mt, almost 4% higher than the previous harvest. This figure is in line with Conab's current estimate," he explains.

Although some areas are experiencing above-average rainfall, which could slightly reduce the ATR to around 131 kg/ton, this marginal drop is expected to be more than offset by increased cane availability and a larger sugar mix. The latter continues to trend upward, supported by continued investment in the crystallization process.

As a result, sugar production in the region is currently estimated at 3,9 million tons, along with 2,2 billion liters of sugarcane ethanol. Taking into account the expansion of corn ethanol capacity, especially investments by Inpasa, total ethanol production for 2025/26 could reach 2,75 billion liters.

India

India's 2024/25 sugar production fell short of expectations, reaching a gross volume of approximately 30 Mt. After diverting 3,4 Mt for ethanol production, net sugar production stood at 26,1 Mt. Regarding exports, the country exported 800 t during the season, with the remaining 200 t quota being transferable to 2025/26.

For the analyst, looking ahead, the outlook for 2025/26 is more optimistic. "Abundant rains in May improved soil moisture and supported early crop development. Reflecting this, ISMA's initial estimate projects gross sugar production of close to 35 Mt. The diversion for ethanol is expected to be between 4 and 4,5 Mt, resulting in net sugar production between 30,5 and 31 Mt. Our current estimate is in line with the upper limit of this range, at 31 Mt, with potential for growth," she calculates.

Regarding exports, Hedgepoint's initial forecast was conservative, at 500 tons. "However, taking into account the 200 tons unused in 2024/25 and ISMA's request for the government to authorize approximately 2 million tons of exports, we have revised our projection to 1,5 million tons. At this level, India would continue to stockpile less than its three-month consumption target, a trend observed over the last five harvests," he says.

Thailand

Thailand's sugar production reached 10 Mt in 2024/25, supported by an expansion in cultivated area and a partial recovery in productivity. Sugarcane crushing increased by 10 Mt compared to the 2023/24 harvest, totaling 92 Mt, with over 85% coming from fresh cane. Despite the increase in production, export volumes remained modest, in line with last season's levels. In June, Thailand exported 3,57 Mt of sugar.

Of this total, raw sugar shipments increased 18%, while white sugar exports decreased 14% year-over-year. However, we still expect total exports to reach around 6,7 Mt, as inventory builds are not typical in the Thai market.

"Looking ahead to the next season, we have revised our sugarcane production forecast to 100 Mt. While this still represents a recovery, it is less pronounced than previously expected due to the risk of fungal diseases. On the other hand, weather conditions have been favorable, with above-average rainfall forecast for September and October across much of the country," the analyst estimates.

China

China's sugar production in 2024/25 reached 11,16 Mt, supported by a planted area of 1,39 million hectares, an increase of more than 10% compared to 2023/24. Despite slightly lower productivity of 58,65 t/ha (combining sugarcane and beet), total production increased by almost 12%.

Livea Coda explains that although expectations were high based on Brazil's schedule and May deliveries, Chinese customs data for June showed lower import volumes, suggesting that some of the designated cargo may have arrived in July – and indeed it did.

The country imported 740 tons of sugar, a record for the period. With favorable import arbitrage, China is expected to import more sugar than previously anticipated, despite strong domestic production and a positive outlook for 2025/26.

The Ministry of Agriculture revised its import forecast for 2024/25 from 4,75 million tons to 5 million tons. Our current estimate includes 4,6 million tons of raw sugar and at least 1 million tons of syrup in sugar equivalent. Smuggling may still play a significant role, as seen in previous years.

So far, China's sugar imports are 9% lower than the previous season. However, we estimate that the volume expected to arrive between August and September will exceed last year's by 13% during the same period. This increase should reduce the overall import deficit to just 4%. Taking syrup and smuggling into account, the deficit has the potential to be even larger, estimated at 11%.

Looking ahead to 2025/26, the China Sugar Association projects production of 11,2 million tons, driven by a slight increase in planted area and improved yields, estimated at 59,7 tons/ha. The Association expects imports to remain stable and demand to increase marginally. Maintaining stable imports between harvests implies a stock buildup of around 1 million tons in our final figures.

Considering the favorable overall outlook for the 2025/26 season in the Northern Hemisphere and a solid, albeit below initial expectations, result from the Center-South region of Brazil, sugar prices may continue to favor stock accumulation.