Raw sugar prices hit an 11-year high this week, trade data showed. Analysts have pointed to unfavorable weather conditions and a drop in production from major producers among the reasons for the surge.
The cost of May futures on the Intercontinental Exchange (ICE) rose above $0.27 a pound on Thursday, the highest price since mid-2011. Although prices have since declined somewhat, they remain well above the February high of $0.22 per pound and are up nearly 40% year-to-date.
Analysts linked the price hike to global demand growth, which is still recovering after the Covid-19 pandemic, but also noted lower production and weaker production prospects in major oil-producing countries. sugar as driving up prices.
As an example, analysts cited last year’s drought which led to a drop in European beet production. Elsewhere, heavy rains in Brazil, the world’s top sugar cane producer, are slowing the start of this year’s harvest, which was due to start in April. India, the second-largest sugar supplier, recently cut its production estimates by almost 3% for the current crop year, also due to off-season rainfall in one of its main sugar-producing regions.
“In recent weeks, the cane crushing season in Asia has started to run out of steam and we have seen significant crop downgrades in major producing countries including India, Thailand, China and the Pakistan,John Stansfield, senior sugar analyst at commodities data platform DNEXT, told CNBC.
S&P analyst Girish Chhimwal predicts the sugar market could become “very volatilein the coming months, depending on the Asian monsoon rains.
“Sugar fundamentals are bullish enough to keep prices high in the short to medium term…Prices should trend to stay high in the 21-24 cents per pound range“, did he declare.
Analysts have also warned that high raw sugar costs will inevitably push up global prices for sweets and sugary drinks.
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