S&D and Trade Flow Update - 2025 08 18

Sugar prices experienced downward pressure throughout 2025, driven by improving expectations around global availability. Raw sugar contracts began the year at 19.5 c/lb, peaking in February amid deteriorating outlooks for India’s 2024/25 season and rising concerns over Brazil’s Center-South 2025/26 performance. However, prices retreated as Brazil’s production proved more resilient.

Despite challenges such as lower-than-expected yields and cane quality, Brazil’s cane crush is projected to exceed 600 Mt, a strong result compared to previous seasons, especially when paired with a record-high sugar mix. This outcome, along with favorable conditions for the 2025/26 Northern Hemisphere crop, prompted market adjustment. Prices stabilized around 16.5 c/lb, reflecting increased supply expectations compared to past seasons. Nonetheless, persistent global demand for sugar prevented prices from remaining at the June low of 15.5 c/lb.

During June, speculation intensified around potential ethanol diversion in Brazil’s Center-South region. However, sugar prices remained attractive, particularly in the key producing states of São Paulo and Minas Gerais, which continued to push the sugar mix to exceptionally high levels, mitigating any significant risk of cumulative mix reductions.

At the 15.5 c/lb level, Chinese demand re-entered the market, positioning China as the leading buyer of Brazilian sugar during May, June, and July. With open arbitrage opportunities, China strategically increased its stockpiles, capitalizing on high supply momentum despite the stronger domestic production during the year.

Trade flows are expected to remain bearish, with a projected surplus exceeding 2.5 Mt between Q3 2025 and Q3 2026. While seasonal factors, such as Brazil’s intercrop period and low domestic ethanol stocks, may offer some price support, the surplus anticipated between Q3 and Q4 2025 is likely to dampen any significant recovery momentum possibly happening at the beginning of 2026.

Additional pressure comes from increased global availability, particularly from countries like India, where export volumes could rise substantially depending on government decisions – note that 2 Mt export quotas have already been requested. This reinforces a bearish outlook for sugar.

However, this doesn’t imply that prices will collapse or reach ethanol parity. It simply suggests that a major rebound, such as surpassing the 20 c/lb threshold, seems unlikely in the near term. A strong price recovery would likely require weather-related disruptions, or major changes to fundamentals, either on the supply or demand side, to shift the current trajectory. For the time being, we don’t expect significant changes.

These years also saw higher crushing volumes after the end of July compared to the long-term average, allowing us to expect some yield resilience in the region. In terms of cane figures, we revised availability down to 605Mt. Although lower than initially expected, the result remains at the higher end of CS crushing volume throughout the years.

Despite discussions in June about ethanol diversion, mills are now pushing a record-breaking sugar mix, expected to reach 52%. This fact has compensated for part of the lower TCH and TRS results. The latter has been consistently lagging past seasons and, using the same group of seasons (12/13, 15/16 and 22/23) as a proxy, its recovery has limited potential. As a result, we revised TRS down to 136.4 kg/t – a sluggish result compared to the past 5 years.

As a result of lower TRS expectations and slightly reduced TCH, seen closer to 76t/ha, but stronger sugar mix, sugar output is now forecast at 40.9 Mt, down 650 kt, with exports estimated at 31.9 Mt, closely aligning with 24/25 levels.

Ethanol diversion is expected to range between 4 and 4.5 Mt, resulting in net sugar output between 30.5 and 31 Mt. Our current estimate aligns with the upper end of that range, at 31 Mt, with potential upside.

Regarding exports, our initial forecast was conservative, at 500 kt. However, factoring in the unused 200 kt from 2024/25 and ISMA’s request for the government to authorize around 2 Mt of exports, we’ve revised our projection upward to 1.5 Mt. At this level, India would continue to stock less than its three-month consumption target, a trend observed over the past five seasons.

While the agency has yet to release projections for 2025/26, weather conditions offer reasons for optimism. In June, less than 2% of cane-growing microregions experienced any drought, ranging from mild to severe. This suggests a potentially stronger outcome for sugar production in the upcoming season, especially considering favorable rainfall in May across most cane regions and positive forecasts for August. 

Despite the lower production outlook, total sugar availability in the U.S. has been revised upward. This adjustment stems from reduced deliveries for human consumption expected in 2024/25, which will boost beginning stocks for 2025/26. Weak demand for food-use sugar is anticipated to persist in the next season. Consequently, the USDA has lowered its import forecast, with Mexican-origin sugar facing the largest reduction, -208ktrv.

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