Global sugar crisis: vast supply drives prices down 30% from annual peak

The global market for raw sugar is currently experiencing a significant downturn, with prices plummeting to levels not seen in half a decade. 

Last week, the price of raw sugar touched a five-year low, reaching 14 US cents per pound, and has shown minimal recovery since that time. 

This decline is part of a broader, sustained slump, evidenced by a 15% reduction in sugar prices since the beginning of October. 

Furthermore, the current price represents a substantial 30% drop from the annual peak of just over 20 US cents per pound recorded during February and March of this year.

The primary and most influential factor driving this price erosion is the vast and abundant global supply of sugar. 

Exceptional harvests and robust production figures in key sugar-producing regions have saturated the market. 

Oversupply and Brazil output

This oversupply scenario has shifted the balance of power decisively towards buyers, leading to aggressive price competition and the consistent downward pressure on futures and spot prices.

This prolonged period of low prices presents significant challenges for sugar producers and exporters, potentially leading to reduced profitability, pressures on crushing margins, and a need for strategic adjustments in planting and production volumes in the coming seasons. 

Conversely, it offers a cost-benefit to major sugar-consuming industries, such as confectionary and beverage manufacturers, who can benefit from cheaper raw material inputs. 

Sugar production in Brazil's key Center-South region, the world's most important producing area, reached 36 million tons by mid-October of the current 2025-26 season. 

This figure, according to data from the Brazilian Sugarcane Industry Association (Unica), represents a year-over-year increase of just under 1%.

“This made up for what was initially a significant decline compared to the previous season,” Carsten Fritsch, commodity analyst at Commerzbank AG, said in a report. 

Production in India

Meanwhile, India, the world's second-largest sugar producer, is poised for a substantial increase in sugar output. 

The Indian Sugar & Bio-Energy Manufacturers Association (ISMA) forecasts production to climb by 18.5% to 31 million tons in the 2025-26 season. 

This anticipated rise follows a reduction in the amount of sugar allocated for ethanol production compared to initial projections.

To alleviate the domestic oversupply, the Indian government is contemplating the export of 1.5 million tons of sugar.

ISMA had even called for the export of 2 million tons.

“The additional supply from India is likely to increase the existing oversupply on the world market and thus put pressure on prices,” Fritsch said. 

Czarnikow, a sugar trader, projects that India's sugar production will reach 32.8 million tons in the 2025-26 season, contributing to an expected global supply surplus of 8.7 million tons. 

This significant surplus is only anticipated to decrease slightly in the following 2026-27 period, according to their current outlook.

Price outlook not ideal

Fritsch added: 

However, the current price levels prompt a closer examination of sugar production's profitability. 

Reportedly, Brazilian sugar mills have recently opted to ramp up ethanol production at the expense of sugar.

“The price of sugar is therefore unlikely to fall much further unless the price of oil also falls, making ethanol production less attractive,” Fritsch said. 

A long-term consequence of the current low price environment is the potential for higher prices, as reduced profitability is likely to result in less sugar cane being cultivated, he added.