Global Sugar Prices Rise as Asian Crops Are Damaged by Weather
With sugar prices surging, Ishaq Abdulraheem was left with limited options. The Nigerian baker chose to halve his output because raising the price of bread would result in lower sales.
The skyrocketing prices of sugar proved to be the final straw for many other bakers who were trying to make ends meet while facing increased expenses for flour and fuel. As a result, they permanently closed.
Bread, a staple food for the 210 million people living in Nigeria, requires sugar to be made, and for many of them who are struggling to put food on the table, it provides an inexpensive source of calories. There are fewer bakers and less bread due to rising sugar prices, which have increased by 55% in just two months.
Abdulraheem declared, "It is a very serious situation."
Due primarily to reduced global supply following exceptionally dry weather that harmed harvests in India and Thailand, the world's second and third-largest exporters, sugar prices are at their highest levels since 2011.
For developing countries already dealing with shortages of staple foods like rice and trade restrictions that have increased food inflation, this is just the latest blow. Because of the combined effects of the war in Ukraine, weaker currencies, and the naturally occurring climatic phenomenon El Nino, all of these factors lead to food insecurity. Richer Poorer countries are having difficulty, but Western nations can afford the higher costs.
According to Fabio Palmeri, an FAO global commodities market researcher, the organization expects a 2% decrease in global sugar production in the 2023–24 season compared to the previous year, or a loss of roughly 3.5 million metric tons. Global sugar reserves are at their lowest point since 2009 as a result of rising use of sugar for biofuels like ethanol.
Although Brazil is the world's largest sugar exporter, its crop will only be sufficient to fill shortages in 2024. Until then, nations that rely heavily on imports, such as the majority of those in sub-Saharan Africa, continue to be at risk.
For example, Nigeria imports 98% of its raw sugar from other nations. In 2021, it announced a $73 million project to expand sugar infrastructure and outlawed the import of refined sugar, which went against the plan to increase domestic sugar processing. However, those are longer-term tactics. Abuja traders, such as Abba Usman, are currently having issues.
Usman now has to pay $81 for the same 50-kilogram bag of sugar that he paid $66 for a week ago. His clientele is dwindling as prices rise.
"The price keeps increasing every day, and we don't know why," Usman stated.
The El Nino, a natural phenomenon that modifies global weather patterns and can produce extreme weather conditions ranging from flooding to drought, is partially to blame. According to scientists, El Nino is getting stronger due to climate change.
India saw its driest August in more than a century, and crops in Maharashtra, the western state that produces more than a third of the country's sugarcane, were stunted during the critical growing season.
The Indian Sugar Mills Association predicts that this year's sugar production in India will drop by 8%. The most populous country in the world, which also consumes the most sugar, is currently limiting sugar exports.
According to Thailand Sugar Planters Association leader Naradhip Anantasuk, El Nino effects early in the growing season changed both the quantity and quality of the harvest. Compared to this year's 93 million metric tons, he anticipates that only 76 million metric tons of sugarcane will be milled in the 2024 harvest season.
According to a U.S. Department of Agriculture report, Thailand's output would decline by 15% in October.
In a matter of days, Thailand reversed a rise in sugar prices and instituted price controls—a first since 2018. Anantasuk claimed that by limiting their earnings, this would deter farmers from cultivating sugar.
"It's like preventing the industry from growing, preventing an open competition," he stated.
Due in part to government orders that they not burn their fields, which lowers harvesting costs but covers a large portion of Thailand in thick smog, wholesale prices had been permitted to increase in order to assist farmers in meeting their increased expenses.
Forecasters predict that Brazil's harvest will surpass last year's by 20%, according to Kelly Goughary, a senior research analyst at the agriculture data and analytics company Gro Intelligence. However, because the nation is located in the Southern Hemisphere, the increase in worldwide supplies won't occur until March.
According to the USDA, this is due to Brazil's earlier this year's favorable weather combined with an increase in the area planted with sugarcane.
Palmeri of the FAO stated that the next few months are the biggest cause for concern. According to him, population expansion and rising sugar consumption will put additional strain on sugar supplies.
According to USDA data, the world's sugar stockpiles can now only sustain its needs for less than 68 days, down from 106 days when they started to decline in 2020.
"It's at the lowest levels since 2010," the International Food Policy Research Institute's senior research fellow Joseph Glauber stated.
According to Palmeri, China, the No. 2 importer, was compelled to release sugar from its stocks to offset high domestic prices for the first time in six years, while Indonesia, which was the largest importer of sugar last year, has reduced its imports.
According to FAO economist El Mamoun Amrouk, some nations find that importing more costly sugar depletes their foreign exchange reserves, which are also needed to pay for oil and other essential commodities. These reserves include dollars and euros.
Kenya is included in this. It used to be sugar self-sufficient, but now it imports 200,000 metric tons annually from a trade bloc in the region. The government restricted imports in 2021 in an effort to shield domestic farmers from foreign competition, but it later changed its mind when harvests declined as a result of poor management and insufficient rain.
Kenya produced progressively less sugar between June and August. From September to October, monthly imports doubled as a form of compensation. Meanwhile, according to store owner Joseph Kuraru, the cost of a 50-kilogram bag of local sugar has doubled to $60.
Back in the biggest economy in Africa, the plight of Nigerian bakers is a microcosm of the consequences of growing food and fuel prices as well as the disproportionate impact of high sugar prices due to their widespread use. Sugar is used by Abuja's numerous bakeries to feed the yeast that rises in bread and to sweeten cakes.
Often, the only food that low-income households can afford is bread. Some people go hungry when bakers increase the price of bread, as they did by 15% earlier this year.
According to Mansur Umar, the president of the Nigerian Bakers' Association, not passing along increased costs is not an option.
"There is no way you can buy high and you sell low," he stated.