This week, raw sugar prices reached an 11-year high, according to trading data. Analysts attribute the spike to adverse weather and major producers experiencing a fall in production
On the Intercontinental Exchange, (ICE) the cost of May futures pushed past $0.27 per pound Thursday, marking the highest price since mid-2011. While prices have subsided since then somewhat, they continue to remain over the February peak of $0.22 per pound, and are up nearly 40 year to date.
Analysts say the increase in price is linked to growing global demand, which is still recovering from the lows of the pandemic. However they have also noted production output has dropped, and production outlooks in major sugar producing countries are pointing to a supply shortage in the future, all of which are driving prices upward.
In Europe for example, analysts cite the drought last year, which lowered the output of the European beet crop. Meanwhile, in Brazil, which is the largest producer of sugarcane in the world, this year’s harvest was due to begin in April, however heavy rains have slowed harvesters, and reduced production output. And the world’s second largest sugar supplier, India, has seen its production estimates cut by almost 3% due to unseasonable rainfall in one of its main sugar-growing regions.
John Stansfield, a senior sugar analyst at commodity data platform DNEXT, said in an interview with CNBC, “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.”
Girish Chhimwal an analyst at S&P, says that Asian monsoon rainfall could cause the sugar market to become “very volatile” over the coming months.
He said, “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.”
Analysts have noted that as the price of sugar increases, it will inevitably lead to follow-on hikes in the price of candy and sugared drinks.
