By Mumbi Gitau
White sugar futures rose as much as 4.3% on Tuesday, reaching the highest levels since 2011, as concerns over limited global supplies increased.
The price of sugar, a key ingredient in many food and beverage products, has risen due to multiple factors.
For example, a key exporter, India, is expected to have limited exports, while other countries, such as Pakistan and Thailand, face low supplies.
In addition, it is feared that the recent rise in oil prices could further exacerbate the problem by encouraging Brazilian and Indian mills to focus on ethanol production instead of sugar.
The decision to produce more sugar or biofuel depends on which option is more attractive.
Francois Thaury, an analyst at Paris-based advisor Agritel, said that, as a result, the players mentioned above have already revised their production estimates for major countries.
Higher sugar prices make the manufacture of confectionery and bakery products more expensive at a time when energy, fuel, and labor costs have also risen.
For example, the rise has already compounded the impact of inflation in the UK, where shoppers are paying more for sweets and soft drinks.
Higher retail sugar prices in India also add to bets that the government will not allow additional exports this season, pressuring the market further, Thaury said.
A large crop in Brazil for the 2023-23 season could help ease market stress.
However, a lack of deliverable sugar ahead of the May white sugar contract expiration on Friday and fund buying is pushing prices higher, according to Claudiu Covrig of Covrig Analytics.
“Brazilian volumes are badly needed, but they’re not there yet,” Covrig said.
“The funds could soon become the pilots of the market, while the rest will remain mere passengers.”
With information from Bloomberg
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