Sugar markets retreated in mid-January following evidence of mounting oversupply. India’s production accelerated 22% year-over-year to 15.9 million tonnes through mid-month, while analysts raised their 2025/26 global surplus forecast to 4.7 million tonnes from 4.1 million tonnes.

Favourable monsoon drives India’s production increase

India’s 2025/26 sugar production from October 1 to January 15 reached 15.9 million tonnes, driven by favourable monsoon rains and increased sugarcane acreage. The strong momentum maintained through the mid-season crush period.

Full season production estimates vary considerably, with the Indian Sugar Mills Association (ISMA) forecasting 31 million tonnes—an 18.8% increase from their November projection. The USDA Foreign Agricultural Service projects even higher output at 35.25 million tonnes, representing a 25% year-over-year increase. Despite the divergent estimates, all projections point to substantial growth over the prior campaign.

Export authorization marks policy shift

The Indian government authorized a 1.5 million tonne export quota for the 2025/26 season, with the food secretary signalling potential for additional volumes to address domestic supply. This marks a shift from export restrictions imposed in 2022/23 after production shortfalls limited availability.

ISMA reduced its estimate for sugar diverted to ethanol production to 3.4 million tonnes from the July forecast of 5 million tonnes, potentially freeing additional volumes for domestic consumption or export.

Global supply outlook

The widening surplus creates downward pressure on prices despite record fund long positions in London white sugar, which create volatility risk. Analysts project the global surplus will contract sharply to 1.4 million tonnes in 2026/27 as weak prices discourage output.

Brazil’s Center-South mills crushed 600.4 million tonnes of cane through December, with sugar production rising 0.9% to 40.2 million tonnes despite lower crushing volumes. However, the second half of December showed sugar mix collapsing to 21.2% versus 32.7% the same period last year, reflecting an intensified ethanol pivot.

European processing operations continue in northern regions while initial 2026/27 contracted area projections suggest reductions below 10%, potentially yielding production in the low-16 million tonne range.

This article is part of a more comprehensive sugar market analysis. For the full analysis, go to: https://app.vespertool.com/market-analysis/2615