But the sugar deficit, which the USDA calculates from the gap between production and human consumption, was seen at just 2.6m tonnes in 2016-17, down from the 4.3m tonnes it forecast earlier in the year.
In September sugar analyst group Platts Kingsman forecast the sugar deficit in 2016-17 at 6.45m tonnes, while Rabobank saw it at 7.5m tonnes.
"The world sugar economy is facing the second season of significant statistical deficit," said the International Sugar Organisation.
India, China deficit
The decline in stocks will be led by sharp falls in India and China, where they are seen the lowest level since 2010-11, according to the US Department of Agriculture.
The USDA saw stocks in India falling to 6.3m tonnes in 2016-17, down from 8.0m a year ago.
In China, the stocks will fall to 2.6m tonnes next year, compared with 3.2m in 2015-16.
Production gains in Brazil, EU
Sugar production in Brazil is forecast up 3.1m tonnes year-on-year to 37.8m on favourable weather and a higher percentage of sugarcane diverted towards sugar production instead of ethanol.
This is an upgrade of some 700,000 tonnes from the previous report.
Likewise, production in the European Union is also forecast to rebound 1.9m tonnes to 16.2m on higher sugar beet area.
These gains seen in Brazil and EU, are set to offset declines in India and Thailand.
India's production is forecast to drop 3.6m tonnes to 23.9m due to lower area and yield.
In Thailand production is forecast down 470,000 tonnes to 9.3m, as "severe drought conditions during the growing stage are expected to lower yields," according to the USDA.
Overall, world sugar production in 2016-17 is expected up at 170.9m, compared to 169.3m a year earlier by the USDA.
The International Sugar Organisation, however, puts sugar production at a more bearish 168.7m.
Higher consumption
But higher consumption, expected at a record 174m tonnes, is expected to counter any production increases and draw stocks down.
Consumption in India, the world's largest consumer, is predicted to rise to a record 27.2m in 2016-17.
This year will mark the first time in seven years when India's production falls below consumption.
Consumption is estimated to rise in Russia, due to "expansion in production of home-made alcohol," said the USDA.
