Sugar prices surpass 2012 highs
In April 2023, the US commodities market saw a rush of sugar prices. Experts at The Wall Street Journal point out that the increase was primarily due to lower yields from significant producers. Another boost to the growth was an increase in demand from China.
Analysts note that raw cane sugar futures have reached record prices since 2012. There has been an upward trend in value since the start of the year on the New York commodities exchange, which is considered a key marketplace. In April, the futures price surpassed 24 cents per pound, the highest in 10 years.
Adverse weather conditions resulted in lower sugar yields in Thailand, India and China. The decline in production occurred when China’s economy was gradually picking up after easing measures to prevent coronavirus outbreaks.
The situation with lower yields in several countries has benefited Brazil, where weather conditions favour sugar production. Production is forecast to reach 40 mln tonnes this season. Last year the figure was 36.5 mln tonnes.
However, experts believe that increased supplies from local farmers will not be able to offset declining exports from other producers. As a result, the price of sugar will continue to rise. And here, food companies will face a severe dilemma: who will compensate for the rise in price – the business or the end-users. To reduce costs in the future, some companies already buy large quantities of sugar. Another way out of the situation could be a switch to alternative ingredients for sweetening products, such as corn syrup. The latter option is an optimal solution for beverage manufacturers.
Sugar prices have risen steadily, while the prices of other commodities on the commodity markets have remained almost unchanged since last year. For example, wheat and maize prices have even fallen slightly, as have nickel and gas rates. And the costs of cocoa and orange juice have risen, following sugar.
Not only are cane sugar prices rising, but refined sugar prices are also rising. In the first quarter of 2023, a tonne of this product traded for US$663.8. Compared to the previous period, the price has increased by 20%. This figure was the highest since 2011. Increased imports to China, where domestic sugar prices rose by 16%, contributed to the price increase. Regarding forecasts, Marex Spectron believes that the sugar deficit will exceed world production by about 6-7 tonnes, a situation that will continue for three years.
