From June 2022 to June 2023, sugar prices have risen by a whopping 41.9 per cent. To describe this sharp inflation in sugar prices, a new term has emerged: “sugarflation”. This sugarflation has come off the back of declining production figures in key producing nations such as India, Thailand, and China during the 2022-2023 sugar season, leading to a steep rise in sugar prices over the past few months.
Alongside these low levels of output, a low beet harvest in the European Union (EU) has exacerbated the situation. The cold and wet weather during spring in EU nations such as France, Germany, and Poland, which account for roughly 30 percent of the global beet production, has only added to the ongoing sugar shortage. What’s more, in May 2023, India – the second-largest sugar producer globally – banned sugar exports to ensure domestic availability, with this ban further supporting the upward trend in sugar prices.
Nevertheless, sugar prices are expected to rise to an even greater extent during H2 2023. Nidhi Jain, specialist at The Smart Cube, comments on what is set to cause a surge in the price of the soft commodity during the second half of the year:
“For the remainder of the calendar year, sugar output is set to be significantly impacted by variable weather conditions. This is largely being led by the El Niño phenomenon. The event affects weather patterns and ocean temperatures and is known for bringing heavy rainfall to some regions, such as Latin America and the southern US, while causing warmer weather and droughts in others, like Australia and south Asia.
“The intensity of the dry season that El Niño is set to cause this year could result in a 10 to 15 per cent reduction in sugarcane yield globally. India, Thailand, and China, all of which are among the top five producers of sugar globally, are forecasted to witness a decline in production in H2 2023 as a result. Looking specifically at Thailand, sugarcane output is expected to decline 21 per cent in 2023–2024 as a result of the weather phenomenon.
“Additionally, sugar prices are expected to surge in H2 2023 due to an anticipated rise in demand from key sugar-consuming countries. For instance, since April 2023, sugar prices in India have increased by more than 6 per cent, and they are expected to continue to rise as demand from large consumer nations increases during the peak of summer, along with an anticipated decline in production.
“The impact of this is already being felt across a number of different industries. For example, the wider confectionary industry is under increasing amounts of pressure to tackle the crisis. Small players, such as bakeries and hotels, who depend on sugar as a crucial ingredient for their products, are reportedly suffering diminishing profit margins as they battle to absorb the increasing prices without passing them on to their clients, unlike large players.”