The global sugar market is undergoing a significant transformation, moving from a period of deficit to one of substantial surplus, which has directly impacted sugar prices. This year alone, the price of raw No.11 sugar has plummeted by more than 20%, reaching its lowest valuation since October 2020. This dramatic shift is primarily driven by forecasts indicating a transition from an almost 2 million tonne deficit in 2024/25 to an estimated 7 million tonne surplus in 2025/26, representing the most considerable surplus in eight years.
A critical factor influencing this market dynamic is Brazil's ethanol parity. With sugar prices currently below the ethanol parity, Brazilian sugar mills are expected to prioritize ethanol production. This strategic reallocation of sugarcane will inevitably lead to a reduction in sugar output, potentially mitigating the anticipated market surplus to some extent. Additionally, the forecast for a strong Indian harvest in 2025/26 poses another significant variable. If government policies permit, increased exports from India could further augment global sugar supplies, intensifying downward pressure on international prices later in the season. Meanwhile, the European Union's sugar market is expected to remain stable, with comfortable stock levels maintained by reduced exports and restricted imports from Ukraine. This balance in the EU market is likely to cap both price increases and prevent severe price declines.
Looking ahead, while the market may experience a brief period of price strengthening in the first quarter of 2026—a typical off-crop season for CS Brazil—this temporary tightness is expected to dissipate as the second quarter progresses. The overarching trend indicates a sustained period of lower sugar prices due to the burgeoning global surplus. Market participants should remain vigilant of these evolving supply and demand fundamentals, as well as policy decisions in key producing regions, to navigate the complex landscape of the international sugar market.
Embracing adaptability and foresight in response to global market shifts, such as the evolving sugar market, empowers us to navigate challenges and discover new opportunities. It reminds us that every change, while presenting its own set of hurdles, also brings the potential for innovation and strategic growth, guiding us towards a future of resilience and prosperity.
