Sugar Prices Plummet as Brazil's Sugar Mills Prioritize Sugar Production Over Ethanol

Sugar prices fell to 1-week lows on Monday due to the outlook for higher Brazil sugar production, as mills prioritize sugar production over ethanol. Brazil's sugar mills are crushing more cane for sugar, driven by drier cane crops. Higher sugar production in India, the world's second-largest producer, is also bearish for prices.

Sugar prices fell to 1-week lows on Monday, driven by expectations of increased sugar production in Brazil and India. Brazil's sugar mills are prioritizing sugar production over ethanol, leading to higher sugar output. Meanwhile, India's favorable monsoon rains are projected to boost its sugar production.

Brazil's Sugar Mills Boost Production

October NY world sugar #11 (SBV25) and October London ICE white sugar #5 (SWV25) both fell on Monday, with SBV25 down by -0.13 (-0.79%) and SWV25 down by -2.00 (-0.42%) [1]. Covrig Analytics reported that Brazil's sugar mills are favoring sugar production over ethanol, crushing more cane for sugar as harvesting approaches its peak due to drier cane crops [1]. This trend is expected to continue, weighing on sugar prices.

The percentage of sugarcane crushed for sugar by Brazil's sugar mills in the second half of July increased to 54.10% from 50.32% the same time last year. Unica reported that Brazil's Center-South sugar output in the second half of July fell by -0.8% y/y to 3,614 MT, but the 2025-26 Center-South sugar output through July fell -7.8% y/y to 19,268 MT [1]. Conab, Brazil's government crop forecasting agency, also noted that 2024/25 Brazil sugar production fell by -3.4% y/y to 44.118 MMT, citing lower sugarcane yields due to drought and excessive heat [1].

India's Favorable Monsoon Rains Boost Production

The outlook for higher sugar exports from India is bearish for sugar prices. Bloomberg reported that India may permit local sugar mills to export sugar in the next season, which starts in October, due to abundant monsoon rains that may produce a bumper sugar crop [1]. India's Meteorological Department reported that cumulative monsoon rain in India was 611.2 mm as of August 18, or 1% above normal [1]. The Indian Sugar and Bio-energy Manufacturers Association recently said that it will seek permission to export 2 MMT of sugar in 2025/26 [1].

India's National Federation of Cooperative Sugar Factories projected that India's 2025/26 sugar production would climb +19% y/y to 35 MMT, citing larger planted cane acreage [1]. This would follow a -17.5% y/y decline in India's sugar production in 2024/25 to a 5-year low of 26.2 MMT, according to the Indian Sugar Mills Association (ISMA) [1].

Global Sugar Surplus Expected

Sugar prices retreated through early July, with NY sugar falling to a 4.25-year low and London sugar sliding to a 4-year low, driven by expectations of a sugar surplus in the 2025/26 season [1]. Czarnikow projected a 7.5 MMT global sugar surplus for the 2025/26 season, the largest surplus in 8 years [1]. The USDA also projected that global 2025/26 sugar production would increase by +4.7% y/y to a record 189.318 MMT, with global sugar ending stocks at 41.188 MMT, up 7.5% y/y [1].

References

[1] https://www.cscoop.net/news/story/34225990/the-outlook-for-higher-brazil-sugar-production-weighs-on-prices
[2] https://www.nasdaq.com/articles/sugar-prices-retreat-outlook-higher-brazil-sugar-production
[3] https://www.nasdaq.com/articles/outlook-higher-brazil-sugar-production-weighs-prices