Sugar Market Stuck in a Tug-of-War: India’s Ethanol Push Lifts Prices While Global Supply Surge Drags Them Down

Image from Britannica.com

Sugar futures edged higher on Monday, continuing to drift just below last Wednesday’s one-month highs as the market absorbs a mix of bullish and bearish forces. One of the key supports for prices is fresh momentum out of India, where the food ministry is considering raising the price paid for ethanol used in gasoline blending. If approved, sugar mills may divert more cane toward ethanol rather than refined sugar, tightening global supply. Prices also remain supported by India’s recent export decision: the government will allow only 1.5 MMT of sugar exports for the 2025/26 season — notably lower than earlier projections of 2 MMT. India first imposed export restrictions in 2022/23 after unpredictable monsoon rains cut harvests and pressured domestic inventories.

But not everything favors the bulls. The International Sugar Organization (ISO) last week shifted its outlook sharply, now expecting a 1.625 MMT global surplus for 2025-26. That’s a dramatic reversal from the 2.916 MMT deficit forecast for 2024-25. The jump in supply is being driven by stronger production in India, Thailand, and Pakistan. The ISO also now sees global output rising 3.2% year-over-year to 181.8 million MT next season — a big jump from its previous expectation of a mild deficit.

These expectations of abundant supply have dragged the market down throughout the past month. London sugar fell to a 4.75-year low on November 13, while New York sugar hit a five-year low on November 6, pressured by surging output from Brazil and growing chatter of a worldwide surplus. Sugar trader Czarnikow added to the bearish tone after lifting its 2025/26 global surplus estimate to 8.7 MMT, up from September’s 7.5 MMT projection.

Brazil’s production outlook remains one of the strongest headwinds for prices. Conab recently raised its forecast for Brazil’s 2025/26 sugar output to 45 MMT, up from 44.5 MMT. Unica data shows the momentum is already visible: Center-South production in the second half of October jumped 16.4% year-over-year to 2.068 MMT. Mills also devoted a slightly larger share of cane to sugar — 46.02%, up from 45.91% last year — and cumulative output for the 2025-26 season through October is running 1.6% above last year at 38.085 MMT.

With India tightening exports and Brazil churning out record supply, the sugar market remains stuck between two powerful forces — and traders are bracing for more volatility as the global balance shifts heading into 2025.