Sweet rally, sweet problem - 30% increase in sugar prices since the beginning of the year

The price of sugar futures on the international market oscillates around USD 700 per ton. This is a jump of more than 30%. in five months and the highest level since December 2011. In turn, since the August 2019 low, sugar contracts have jumped by about 150%.

A new term was born: sugarflation

Confectioners are worried about another factor that could increase the prices of their products, but they cannot increase the prices of their baked goods, because inflation is already affecting the price.

CFD for sugar contracts, CMC Markets platform

The reason for such a spike in sugar prices lies in unusually high temperatures and heavy rainfall in the main areas where sugar is producedsuch as Brazil and India. The significant drop in production has prompted countries such as India to impose export quotas on sugar.

GUIDE: How to invest in sugar?

The rise in sugar retail prices will put pressure on the overall inflation outlook as it will hit the food and beverage industries directly. Especially the confectionery industry, because it needs a lot of sugar. If the situation prolongs, small business owners will consider whether to raise the price of the product or not.

Industry insiders believe that the high price of sugar does not immediately affect the cost of processed food due to long-term contracts that often run for several years. When existing stocks run out and when previous contracts run out, there will be problems.

The lower production levels, supply shortages and higher prices - seen with flour last year - seem to be a recurring problem. Experts say diversifying imports and securing resources would be essential to stabilize food supplies.

It seems that shrinking sugar production due to abnormal weather conditions is not a one-time phenomenon. A rapidly changing climate could make this a multi-year problem, raising an important question about food security. Experts say that guaranteeing people basic foodstuffs will become more and more important as time goes on.