Global Sugar's Tenuous Surplus: Why a Supply Tightening Lurks in 2024/25

The global sugar market is caught in a paradox. While consensus forecasts point to a 2024/25 surplus, driven by record Thai production and Brazilian ethanol-to-sugar shifts, a storm of underappreciated risks is brewing. Contrarian investors must look beyond the noise: Brazil’s drought-driven yield cuts, India’s ethanol mandates, and EU beet declines could shrink the surplus—or even flip it into deficit—by year-end. Meanwhile, sugar prices, depressed by bearish sentiment, are poised for a rebound as supply-demand imbalances emerge in Q4/2025. Act now: Buy sugar futures before the reckoning.

The Surplus Narrative: A House of Cards?

The USDA projects a 7.0 million metric ton (MMT) surplus for 2024/25, citing robust Brazilian and Thai output. But this outlook hinges on assumptions that are increasingly fragile.

1. Brazil’s Drought: The Elephant in the Room

Brazil’s 2024/25 crop is already faltering. São Paulo’s cane yields plunged 5.3% year-on-year by April, per UNICA, as drought and wildfires destroyed up to 5 MMT of sugarcane. Even optimists at Conab now expect output of just 44.1 MMT—a 3.4% drop—far below USDA’s bullish 45.9 MMT forecast for 2025/26.

The ISO’s deficit warning (−4.88 MMT) isn’t alarmist: Brazil’s cane crisis could slash global supply by 2–3 MMT, turning USDA’s surplus into a knife’s edge balance.

2. India’s Ethanol Mandate: Sugar’s Silent Killer

India’s ethanol blending target of 20% by 2025/26 is diverting sugarcane from sugar production. The ISMA now projects 26.4 MMT of sugar output—a 17.5% drop—as cane is diverted to fuel. Even a favorable monsoon may not save the 2024/25 crop, as ethanol mandates will persist.

Exports, once a key surplus driver, are now capped at 1.0 MMT—a fraction of 2022 levels. With domestic stocks at 5-year lows, any production shortfall could force New Delhi to halt exports entirely, tightening global supplies.

3. EU Beet Decline: The Unseen Drag

European beet production is collapsing under rising costs and climate pressures. Area planted in 2025 fell 5% as farmers switched to cheaper crops. Output is projected to drop to 16.6 MMT, down 1% from 2023/24, per ING. This won’t just reduce EU exports—it will force imports from Brazil and Thailand, further straining global inventories.

4. Thailand’s Limits: Surplus on a Tightrope

While Thailand’s output rose 14% to 10 MMT, its gains are insufficient to offset Brazil’s woes. A 10.35 MMT projection for 2024/25 assumes perfect weather—a shaky bet given recurring droughts in Southeast Asia. Even if achieved, Thailand’s surplus will barely compensate for India’s deficit.

Demand: A Hidden Safety Net

Bearish traders cite slowing global consumption growth (ISO’s <1% annual rate). But this overlooks Asia’s rising appetite, particularly in India and Pakistan, where per capita sugar consumption is rising. Meanwhile, GLP-1 drug adoption—while real—is overhyped: its impact on sugar demand won’t materialize until 2026.

Why Sugar Prices Are Oversold—and Poised to Soar

Prices now trade at $0.06/lb, near 2.5-year lows, reflecting surplus optimism. But the market is pricing in a “best-case scenario” that excludes Brazil’s drought, India’s ethanol pivot, and EU’s beet collapse. By Q4/2025, as inventories tighten and buyers scramble, prices could rebound to $0.08/lb—a 33% gain.

Investment Call: Buy Sugar Futures—Now

The contrarian case is clear:
- Risks are asymmetric: A surplus is already priced in, but the deficit risk is not.
- Timing is critical: Q4/2025 will test supply resilience as Brazil’s harvest wraps and India’s monsoon impact becomes clear.
- Leverage with futures: Sugar’s low correlation to equities and bonds makes it a diversification play.

Act now: Allocate 5–7% of your portfolio to NY Sugar Futures (SB). Target $0.08/lb by December 2025—a return that could outpace most commodities in this uncertain macro environment.

The Bottom Line: Sugar’s “surplus” is a mirage built on wishful thinking. The real story is shrinking supply, policy-driven constraints, and Asia’s insatiable demand. Ignore the consensus—and position yourself for the rebound.