Experts warn costs could rise further due to forecasts of bad weather.
Raw sugar prices reached an 11-year high this week, trading data showed. Analysts have pointed to adverse weather and a drop in output by major producers as among the reasons behind the spike.
The cost of May futures on the Intercontinental Exchange (ICE) surged past $0.27 per pound on Thursday, the highest price since mid-2011. While prices have since somewhat subsided, they remain well above the February peak of $0.22 per pound and are nearly 40% up on a year-to-date basis.
Analysts have linked the price rise with growing global demand, which is still recovering after the Covid-19 pandemic, but have also noted a drop in output and the lower production outlook in major sugar-producing countries as driving prices upwards.
As an example, analysts cited last year’s drought which resulted in a lower output of European beet crop. Elsewhere, heavy rains in Brazil, the world’s largest producer of sugar cane, are slowing the start of this year’s harvest, which was due to begin in April. India, the second largest sugar supplier, recently cut its production estimates by nearly 3% for the current crop year, also due to unseasonal rainfall in one of its main sugar-producing regions.
“In recent weeks, the Asian cane-crushing season has started to wind down and we have seen large downward crop revisions in the key producing countries, most notably India, Thailand, China, and Pakistan,” John Stansfield, a senior sugar analyst at commodity data platform DNEXT, told CNBC.
Girish Chhimwal, an analyst at S&P, predicts that the sugar market could become “very volatile” in the coming months, depending on Asian monsoon rainfall.
“Sugar fundamentals are quite bullish for the prices to remain elevated in the short to medium term… Prices should trend towards staying elevated in the 21 to 24 cents per pound range,” he was cited as saying.
Analysts have also warned that elevated costs on raw sugar will inevitably drive up global prices on candy and sugared drinks.
Image credit: George Hodan