A combination of factors, including the El Niño weather pattern, congested Brazilian ports, export limits in India and Thailand, and expanded use of biofuels, has propelled global sugar prices to their highest level since 2011, said two analysts with the International Food Policy Research Institute (IFPRI) on Tuesday. Sugar supplies “will likely shrink further if production impacts from El Niño worsen, putting continued upward pressure on prices,” they said in a blog.
Higher prices would have limited impact in wealthier nations where consumers could absorb the cost, while they would be a burden on the least developed nations of the world, particularly in sub-Saharan Africa, that are reliant on sugar imports. One third of sugar consumed worldwide is imported. In some low-income countries, sugar is a dietary staple.
Dry El Niño weather reduced the sugar harvest in South and Southeast Asia and is likely to constrain exports from India and Thailand, two of the largest suppliers to the world market. India has controlled exports since June 2022, and Thailand announced last month that it would regulate exports, wrote IFPRI analysts Joe Glauber and Abdullah Mamun.
No. 1 sugar exporter Brazil has a large crop, but sugar shipments have been hampered because ports are jammed with corn and soybeans for export, they said.
Rising demand for alternative energy sources has led countries to expand production of ethanol and to reduce sugar output, said the IFPRI blog, citing an estimate that 30 percent of world ethanol is produced from sugarcane or molasses, a sugar coproduct. India says it plans an ethanol blend rate of 20 percent ethanol into gasoline by 2025, nearly double the current 11.5 percent. Just over half of Brazilian sugarcane is going into ethanol production this year.
“Recent developments in the global sugar market track the experience of other agricultural markets over the past two years,” said Glauber and Mamum. “Supply shortfalls have driven prices to the highest levels in years. Prices are exacerbated by domestic policies, in this case biofuel policies that divert production to nonfood uses and export policies that aim to insulate domestic markets only to ‘export’ that volatility to the rest of the world.”
One fifth of the U.S. sugar supply is imported, with Mexico as the leading source. U.S. sugar policy guarantees a minimum price to domestic sugar growers, with imports calibrated to fill the gap between U.S. production and estimated demand for sugar. Corn is the major feedstock for ethanol in the United States.