- Faced with increasingly tight supplies, sugar prices have risen to their highest level in more than 12 years.
- India, one of the world’s largest sugar producers and exporters, is struggling with a drought that has led to a decline in sugar production.
- Demand for sugar exceeds supply.
Highest sugar prices since 2011
Sugar prices have reached an all-time high internationally. In recent months, prices have been as high as they were last in 2011, and prices are expected to continue rising until at least the end of 2023. This trend is driven both by declining production in India, China or Thailand and by smaller beet harvests in the European Union.
What factors increase the risk of sugar shortages in the market?
Adverse weather conditions caused by El Nino have proven to be the main obstacle to global sugar supply. For example, insufficient rainfall in key states in India, the world’s second-largest sugar producer, led to a decline in sugarcane yields, prompting the Indian government to halt sugar exports.
Although Brazil (the world’s largest sugar producer) is forecasting higher sugar production, rising oil prices may cause sugarcane processors to switch to ethanol production as an alternative to expensive gasoline.
Demand and supply mismatched
Although bad weather has caused supply to fall below normal levels, demand for sugar has not declined significantly. The confectionery industry, among others, is coming under increasing pressure in the face of the crisis. For many companies, this could mean that they have to cut their profit margins to absorb the rising prices without passing them on to customers.