Sugar prices rose due to high demand, combined with bad weather prospects. Analysts say sugar prices still have room to move higher.
Raw sugar futures recently rose to 24 cents/lb, the highest in 11 years. “The sugar fundamentals are pretty bullish as prices will stay high in the short to medium term,” said Girish Chhimwal, sugar analyst at S&P.
Sugar price movements in the past 3 months. 
The high cost of raw materials can push the disadvantage to consumers when the price of cakes and candies will be more expensive. “The price of confectionery, sugary drinks will increase with the price of sugar,” said John Stansfield, senior sugar analyst at commodity data platform DNEXT. Processed food prices are also rising globally, Stansfield added.
“In a chocolate bar, you have milk, cocoa powder etc.. and these costs also add up. The cost of energy and labor to manufacture these products is also increasing,” he said.
Production concerns
Table of Contents
“In recent weeks, the sugarcane pressing season in Asia has come to an end and we have seen a large reduction in production in the main producing countries, especially India, Thailand, China and Pakistan. ‘, said Stansfield.
Sugar production in India.
India is the second largest sugar producer in the world after Brazil.
In early April, the Indian Sugar Trade Association cut its sugar production estimate by nearly 3% for the October 2022 to September 2023 crop year, citing unseasonal rains in Maharashtra, where accounts for more than one third of the country’s sugar production.
Besides, the sugar beet crop in Europe is also not favorable due to the reduced area and severe drought last summer, along with the demand that continues to recover after the Covid period. About 80% of global sugar production comes from sugar cane, according to the International Sugar Organization, while 20% comes from sugar beets.
Severe weather may push sugar prices to continue to rise
S&P’s Chhimwal forecasts sugar prices will tend to stay high around 21-24 cent-pounds. While China could reduce its reserves to relieve pressure on the global market, Chhimwal warned that there are many other factors that could push prices higher.
“El Nino could be a major risk to the manufacturing outlook in Asia, pushing prices higher in the medium term.” According to the US National Oceanic and Atmospheric Administration, there is a 62% chance that an El Nino event will occur between May and June. Depending on Asia’s monsoon rainfall, the sugar market could become more volatile. should be “very volatile” due to the effects of the weather, he added.
Rain in Brazil – the world’s No. 1 sugar producer – is also delaying the start of the harvest in April.
Floods caused by heavy rains in Rio Branco, Brazil on March 30, 2023. 
Fitch Solutions commodity analyst Matthew Biggin said the sugarcane harvest in Brazil’s south-central region – which accounts for 90 per cent of the country’s production – runs from April to December, and production in the region will be the measure. Important gauge for tracking sugar prices.
“Sugar prices are so high right now that even when the Brazilian harvest hits the market – which means a significant drop in prices, prices are still higher than previous historical levels,” he said.
Another factor pushing prices higher was OPEC’s recent surprise decision to cut about 1.6 million barrels of oil per day. Fitch Solutions wrote in a report on April 13 that this has encouraged a shift to using sugarcane to produce ethanol, reducing the supply of sugar producers.
“Bitter medicine” for some countries
Along with higher food prices, countries struggling with food security will be hardest hit by the spike in sugar prices, said S&P’s Chhimwal.
According to him, the countries of North Africa and sub-Saharan Africa will be affected “especially hard”. These are countries with high demand for sugar consumption and import.
“Users have also started to see the impact of higher sugar prices,” said DNEXT’s Stansfield.
Source: CNBC
