Global Sugar Prices Remain Bullish in April 2022

Published 2022년 5월 25일

The FAO Sugar Price Index has recorded a MoM increase of 3.3% and a YoY increase of 20% in April 2022. Most of the reasons behind rising global sugar prices revolve around Brazil, which is the largest sugar producing and exporting country in the world. According to the USDA, the sugarcane fields in Brazil have yet to recover from adverse weather conditions in 2020 and 2021. There has been a delay in getting the harvest ready for crushing, which is resulting in lower crushing rates and a fall in the availability of sugar. In addition, continuously increasing ethanol prices in Brazil and the sustained strengthening of the Brazilian Real against the US dollar have added to the already inflated prices.

The FAO Food Price Index (FFPI) is a measure of the monthly change in international prices of a basket of important food commodities. In April 2022, the FFPI stood at 158.5 points, down 0.8% from the all-time high reached in March 2022. The index was still 36.4 points more than the value recorded in April 2021, which is a YoY increase of 29.8%. The FFPI recorded a drop in April 2022 due to the downturn in the vegetable oil sub-index, along with a slight decline in the cereal price sub-index. On the other hand, sugar, meat, and dairy price sub-indices sustained moderate increases. Looking specifically at sugar, the FAO Sugar Price Index averaged 121.8 points in April, up 3.3% from March 2022, marking the second consecutive monthly increase. The index was 20% more than the value recorded during the same month in 2021.

Source: FAO

There are several reasons behind the rising sugar price index, most of which boil down to changing production and pricing dynamics in Brazil, which is the largest sugar producing and exporting country in the world. In terms of sugar production, the USDA suggests that the sugarcane fields of Brazil have not completely recovered from cases of adverse weather from 2020 and 2021. The erratic rainfalls along with severe frosts in late June and July have impacted the yield of the sugarcane harvests and also resulted in late development of the sugarcane fields. The delay in getting the sugarcanes ready has resulted in postponing the crushing season from the beginning of MY 2022-23 to late April and May. Overall, there has been a shortage of sugarcane in the market, resulting in lower crushing rates and a fall in the availability of sugar and rising sugar prices.

Furthermore, the continuously increasing ethanol prices in Brazil, coupled with the sustained strengthening of the Brazilian Real against the US Dollar, continued to underpin the increase in world sugar prices. It is expected that global sugar prices will remain bullish in the coming months with the ongoing supply issues. The only signs of relief are the larger-than-previously-anticipated production and availability of sugar in Thailand and India, which are major sugar exporters. The increase in these countries is expected to bolster the global supply outlook and prevent more substantial price increases in the coming months.