Why sugar prices have climbed 40% in a year
Sugar prices have skyrocketed nearly 40% this year, reaching a 12-year high, as tight supplies persist in India and worldwide. As of October 25, the benchmark for raw sugars US Sugar #11 contract touched $27.76 per pound, rising from $19.60 per pound in January this year. Several factors are contributing to this huge price increase, which has left consumers and industry players feeling the impact. Let's delve into the reasons behind this surge in sugar prices.
Weather and production concerns
Adverse weather conditions have raised production concerns in major sugar-producing nations. Brazil, the largest producer and exporter of sugar worldwide, has fallen back into a drought situation. Likewise, the third largest producer and exporter, Thailand, is reeling under drought conditions. In India, the world's second-largest sugar producer and exporter, the two major sugar-producing states Maharashtra and Karnataka have seen a bad monsoon. Rainfall in August was 36% less than normal, making it the driest month in more than a century.
Imbalance in supply and demand
According to Darin Newsom, Barchart's senior market analyst, the rise is due to "tight supply and demand, both domestically and globally." Some market projections show that global sugar production fell short of consumption, and numerous private analysts anticipate a similar trend this year. Czapp's May report estimated worldwide sugar production at 173.9 million metric tons and consumption at 176.9 million metric tons for the 2022-2023 crop year.
Indefinite ban on sugar exports from India
Another factor behind the rising sugar prices is India's imposition of an indefinite ban on sugar exports. This move aims to maintain a steady supply of sugar for domestic use at reasonable prices. The restriction on sugar export, which was scheduled to end on October 31, 2023, has been extended till further order. Because of the bad monsoon season, the Indian Sugar Mills Association forecasts a 3.3% decrease in sugar production for the 2023-24 season, totaling 31.7 million tons.
