Dollar Softening Triggers Tactical Recovery in Sugar Markets as Global Oversupply Looms

Sugar futures posted a modest rally today, with March New York contracts climbing 0.26 cents (+1.77%), while London ICE white sugar edged up 7.20 points (+1.72%). The bounce stems from recent dollar weakness, which has prompted short covering in sugar futures—a classic pattern when commodity traders unwind bearish positions in response to currency headwinds. However, this near-term recovery masks deeper structural pressures that have dominated the market for months.

The Bigger Picture: Supply Shock Overwhelms Price Support

Recent weeks have painted an increasingly bearish landscape for sugar prices, with contracts touching multi-year lows as production surges across major growing regions. The fundamental story is straightforward: the world is swimming in sugar, and that surplus is proving difficult for prices to overcome.

India, the world’s second-largest producer, is leading the supply expansion. The India Sugar Mill Association reported that production from October through November jumped 43% year-over-year to 4.11 million metric tons, with 428 mills now operating compared to 376 a year earlier. Looking ahead, ISMA raised its full-year 2025-26 production estimate to 31 million MT—an 18.8% increase—buoyed by above-normal monsoon rainfall and expanded planting. The Indian government’s decision to allow 1.5 million MT of sugar exports in the 2025-26 season means more supplies hitting international markets, adding downward pressure despite the quota being lower than earlier estimates of 2 million MT.

Brazil’s record production trajectory is equally pressuring prices. Conab, the country’s crop forecasting agency, elevated its 2025-26 estimate to 45 million MT, up from 44.5 million MT previously. Center-South production—Brazil’s primary growing region—showed an 8.7% year-over-year jump in the first half of November alone, with cumulative output up 2.1% to 39.179 million MT.

Thailand, the world’s third-largest producer and second-largest exporter, projects a 5% increase in its 2025-26 crop to 10.5 million MT, adding another competitive layer to global supply dynamics.

The Surplus Calculation That Changed Everything

The International Sugar Organization’s November forecast crystallized market concerns. ISO projected a 1.625 million MT surplus for 2025-26—a dramatic reversal from an August prediction of a 231,000 MT deficit and starkly different from the 2.916 million MT deficit in 2024-25. This swing reflects surging production in India, Thailand, and Pakistan.

Sugar trader Czarnikow took an even more bearish stance in early November, raising its global surplus estimate to 8.7 million MT, up 1.2 million MT from a September forecast. The USDA painted similar concerns in its May 22 report, predicting global production would climb 4.7% to a record 189.318 million MT while consumption would rise a modest 1.4% to 177.921 million MT—leaving the market drowning in excess supply. Global ending stocks were forecasted to climb 7.5% to 41.188 million MT.

When Short Positions Get Squeezed: Understanding Today’s Bounce

The market’s recent price collapse created a technical setup primed for short covering. New York sugar had plunged to a 5-year low in early November, while London’s nearest-futures contract posted a 4.75-year low. As prices hit these extremes, traders holding bearish bets on prices continued betting on weakness. Today’s dollar weakness provided the catalyst: with the greenback losing ground, commodities priced in dollars become relatively cheaper for international buyers, triggering automatic buying from short-squeezed traders and improving near-term demand metrics.

However, observers should recognize this rally for what it likely is: a tactical bounce against a structural bear market, not a reversal of the fundamental supply-demand imbalance.

Market Quotes and Sentiment Shifts

Current price action in sugar futures reveals the tension between different timeframes. Short-term traders are reacting to technical setups and currency moves, while longer-term participants remain focused on record harvests ahead. The real test will come when new-crop supply actually floods global markets over the coming months—whether today’s bounce holds or merely represents another selling opportunity for those nursing oversupply concerns.

The consensus among major forecasters is clear: global sugar production in 2025-26 will reach historic highs, consumption growth will trail supply expansion, and ending stocks will swell. Until that oversupply narrative shifts, any price recovery faces headwinds from the fundamental reality of too much sugar chasing too few buyers.