Sugar, consumed in everything from chocolate to fizzy drinks and baked products, is becoming ever more expensive, raising costs for the industry and keeping up pressure on global food inflation.
Prices of refined sugar surged to the highest in more than a decade this week, and are on track to jump about 11% in March, the most for a month since 2021. The raw variety, meanwhile, is hovering near its most expensive level in over six years. Global supplies are becoming tighter, mainly because India, one of the world’s top shippers, is cutting exports after rains hurt the sugar cane crop and as the country diverts more of the sweetener to make biofuel.
Exports from India are set to almost halve to 6 million tons in the year ending in September from about 11 million tons a year earlier, and could slump to as low as 4 million tons next season, according to asurvey of traders and analysts. That reduces supply in a market that’s already tipped to show a shortage next year by consultancies Green Pool and Covrig Analytics.
If the country exports less sweetener than expected next season, “prices will have to rise to extract sugar from any other part of the world,” said Henrique Akamine, head of sugar and ethanol at Tropical Research Services.
India is responsible for 6 million tons for international sugar trade flows in 2023-24, said Mr Akamine. “If you simply remove even half of what we’re forecasting, the trade flow will go into deficit,” he said. The jump in sugar prices has already worsened the impact of inflation in Britain and elsewhere with shoppers paying more for baked goods, sweets, and fizzy drinks.
While top shipper Brazil is expecting bumper production of sugar cane, rains have delayed harvesting and port capacity may constrain supplies to the global market as the country is also gathering a record soybean crop. Output in Thailand, another leading exporter, is also likely to miss forecasts this year.
A steady increase in global consumption and declining stockpiles have made supplies from India even more crucial for the world market. In a sign of how important India is, prices soared to a six-year high in January on concerns that the country wouldn’t approve more exports this season. When the government signalled in March that it may allow more shipments, prices eased.
The drop in Indian exports is down to lower output and more use of sugar cane for biofuel. Heavy rains cut cane yields in Maharashtra, which accounts for more than a third of the country’s sugar output. The food ministry expects national production to fall to 33.6 million tons in the current season, down from an earlier estimate of 35.2 million tons and 35.9 million tons a year earlier. At the same time, Prime Minister Narendra Modi is pursuing an aggressive biofuel programme that will see more sugar cane diverted to make ethanol.