Commodity in focus: Sugar

Fri 28 Jul 2023
Posted by: Phillip Adnett
Trade News

Bags of brown and white sugar

The IOE&IT Daily Update’s look at global commodities continues as we turn our attention to the regular everyday good that sweetens our lives: sugar.

Sugarcane is believed to have been initially used as a feeder crop for animals. It was not until about 2,500 years ago that refined sugar was first produced in India.

Since then, our taste for the sweet stuff and its empty calories has seen sugar become one of the most valuable crops in the world, after cereals and rice.

According to the International Sugar Organization (ISO) world production during 2021 fell by 4.164 million metric tonnes (mt) to 165.167 million mt, a third year of decline.

Recent crops have been affected by bad weather, with India currently predicting that poor rains will diminish yields again this year.

They fell last year due to lower rainfall in June-July, and the same weather pattern is evident this year as well, one farmer from Solapur district in Maharashtra told Reuters.

Maharashtra, which was expected to produce 13.8 million mt of sugar in the 2022-23 marketing year, produced only 10.5 million.

Cane or beet

Lack of rain is less of a problem in the northern hemisphere, which matters because sugar production is a north-south affair.

Sugar comes from either sugar cane (which accounts for 80% of total sugar production) or sugar beet (which accounts for the remaining 20%). Cane is mainly a southern hemisphere crop, whereas beet is mostly grown in the north.

The EU is the world’s leading producer of beet sugar, with around 50% of the total amount. The most competitive producing countries are France, Germany, the Netherlands, Belgium and Poland. The EU also has an important refining industry that processes imported raw cane sugar.

EU tariffs on imported sugar cane to protect its beet farmers led to UK-based Tate & Lyle being a key supporter of Brexit. The company, which makes its sugar and syrup from cane, felt it was disadvantaged.

A Greenpeace report claimed that the company saved £73m in tariffs when the UK established its own tariff regime that allows up to 260,000 tonnes of tariff free raw sugar into the country.

Incidentally, some regard cane sugar as a non-vegan product, because animal bone char may be used in the refining process, something that is not necessary with beet sugar.

Production

World sugar consumption rose in 2021, following three years of decline, to 168.479 million mt.

According to an OECD agricultural outlook report, global average per-capita consumption is expected to increase over the next decade due to income gains and urbanisation in developing countries.

Sugar consumption in Asia is expected to grow the most and to represent more than half of global consumption by 2030, reflecting higher demand in sugar-rich confectionery products and soft drinks.

Meanwhile, consumption in developed countries is not expected to grow in the next decade, a reflection of concerns about its negative effects on health when consumed in excess.

Per capita consumption here is expected to decline, although at a slower pace than in the past 10 years, as several countries have implemented measures, such as sugar taxes, to discourage sugar consumption.

Sugar as fuel

As well as its use as a foodstuff, sugar is increasingly use in the production of the fuel bioethanol. Globally, almost 20% of sugarcane is used for ethanol production, with Brazil supplying 84% of bioethanol produced from sugar.

About 110 countries produce sugar from either cane or beet with the top ten producing countries accounting for nearly 70% of global output.

The top sugar producing countries in the world are (million mt 2022-23):

Brazil                    38          

India                     32

Thailand              11

China                    9

US                         8.4

As a bloc, the EU is the third biggest producer, with 14.9 million mt. The amount of sugar beet grown in Europe makes several European countries among the largest sugar exporters by value.

The biggest exporters of sugar (2022) are:

Brazil                    $11bn (35.6% of total sugar exports)

India                     $5.7bn (18.6%)

Thailand               $3.1bn (9.9%)

France                  $1.2bn (3.7%)

Germany              $890.6m (2.9%)

Among the top exporters, the fastest-growing sugar exporters from 2021 to 2022 were Thailand (up 101.8%), Guatemala (up 57.4%), India (up 50.6%) and France (up 35.5%).

The biggest importers of sugar (2021) are:

Indonesia             $2.4bn (8.4% of total sugar imports)

China                    $2.1bn (7.3%)

US                         $1.8bn (6.4%)

Malaysia              $933.8m (3.3%)

Nigeria                 $901.7m (3.2%)

Asian countries consumed the highest value of imported sugar during 2021, with purchases valued at $13.6bn or 47.9% of the world total. In second place was Africa, with imports at 22.9%, while a further 16.8% of globally imported sugar went to Europe.

Prices

July saw raw sugar prices drop by 2% to 22.57 cents per pound, according to Avatrade pricing quoted by Confectionery News.

Avatrade said sugar prices were down due to an increase in sugar supply from Brazil, the world’s biggest supplier of the commodity. Sugar production was up by 37.7% on the year in May.

Sugar prices spiked during the pandemic, rising from around 10-14 cents to 26 cents in May.

According to CNBC, agricultural commodities such as sugar have bucked the market as other non-food commodities have slid on the back of economic decline and the possibility of recession.

Global commodities have seen a more than 25% slump over the last 12 months, as reflected by the S&P GSCI Commodities index, but agricultural commodities such as grain, wheat and sugar have gained almost 11%. 

Prices of soft commodities are rising as El Niño reduces crop output prospects.

Sugar prices rose in the final quarter of 2020 and the first quarter of 2021, in line with other commodities, but rose more strongly mid-year before falling back in the final quarter of 2021, to return a 34% rise in the FAO food index sub-category, compared to a 23% increase overall.

In real terms, up to 2030, the OECD expects raw and white sugar prices to remain fairly flat, with additional supplies likely to keep up with the growth in consumption in developing countries.