Demand and supply play a crucial role in determining the price of any commodity. A lower market demand amid surplus supplies lead to a drop in prices of the commodity while a higher demand amid fall in supplies lead to a surge in prices and as it seems the latter has been true for sugar on 20th of April 2023.
On Thursday, global sugar supplies surged to nearly 11-year highs as indications of tighter global supplies poked investors to buy. A look at the data reveal that May NY world sugar #11 (SBK23) closed 3.61% higher, while Aug London white sugar #5 (SWQ23) closed 2.29% higher.
Factors Supporting Global Sugar Prices
Indications of strained sugar supplies led to a sharp rise in global sugar prices and pushed them to 11-year highs.
India is the leading sugar exporter in the world and reports by the Indian Sugar Mills Association (ISMA) on 19th of April, 2023 that India’s sugar production fell by 5.4 per cent YoY to stand at 32.9 MMT during Oct 1- April 15 reflected sharply on the price. Further, speculations that India might not permit additional sugar exports in 2022/23 is also supporting rising sugar prices.
The case with Europe is also the same. The European Association of Sugar Manufacturers forecasted on 8th of December 2022 that European union’s (EU’s) sugar output is set to fall by 7 per cent this year is also acting bullish for the global sugar prices.
Also, changing weather events are also cutting down hopes of bumper sugar production. The U.S. Climate Prediction Center on 13th of April 2023 raised the probability of an El Nino affect, which has the potential of causing heavy rains in Brazil and droughts in India. The last time El Nino affected sugar crops in Asia was in 2015 and 2016 which led to surge in prices of sugar.
The Bottom Line
Indications of tighter global supplies have led to surge in global sugar prices. Combined factors such as ISMA reports of lower sugar production and USDA’s predictions of El Nino weather pattern have acted bullish for the global sugar market and have pushed global sugar prices to 11-year highs.
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