Sugar Trading and Factors Affecting Sugar Prices in The Global Market
The start of the year 2022 witnessed a drop in global raw sugar price by more than 10 percent from a multi-year high that was achieved in November 2021 in response to increasing global supplies. There will also be additional pressure on sugar with the annual rebalancing of commodity indexes. The supply woes are expected to ease out with better prospects for Brazil sugar harvest in the upcoming season starting in April and a bigger crop of sugar in India.
The global market for sugar was around 193.2 Million Tons in 2020 and industry watchers expect it to reach around 202.1 Million Tons by 2026.
Some of the biggest sugar export countries are Brazil, India, Thailand, France, and Germany. Together, these five countries are responsible for around 64 percent of the global exports of the commodity. The top sugar producing countries are Brazil, India, the EU, China, and Thailand.
Want to trade in sugar? Know more about sugar price drivers
Sugar is a sweet crystalline substance manufactured from either sugar cane of sugar beet, used for myriad food and non-food applications. As of now, there are around 110 countries that produce sugar either from cane or beet and eight countries produce sugar from both cane and beet. Sugarcane is responsible for around 80 percent of the total global sugar production on an average.
Sugar crops are also used for biofuels and co-generation of electricity. Sugarcane is regarded as one of the most significant sources of biomass for production of biofuel. The factors to keep in mind for trading in sugar commodities are mentioned below.
Low levels of bulk sugar stocks are indicative of a strong demand, weak supply, or a combination of the two. The supply chain of this commodity is comparatively long. Therefore, in instances, when there are issues pertaining to storing the commodity, then there is also a significant impact on sugar price.
Valuation of US dollar
Quite like other commodities that are traded internationally, sugar is also priced in terms of US dollar. In instances when there is a decrease in the value of the US dollar as compared to the sugar buyer’s currency, the buyer would be spending less of his currency to buy a given amount of the commodity. With the commodity becoming less expensive, there would be an increase in demand, which would push the prices up, and have an impact on sugar import and export.
Availability of Substitutes
Chemical sweeteners and high-fructose corn syrup are some of the substitutes of sugar. The increasing use of such substitutes can have an impact on the prices. As of now, sugar is responsible for around 70 percent of the global demand and artificial sweeteners accounting for the rest.
Many a times, sugar markets get distorted by subsidies and import tariffs. In some instances, governments have been known to design import tariffs to protect the interests of domestic farmers, which have raised the prices, which in turn has prompted the use of alternative products to sugar such as high-fructose corn syrup.
Warm, dry weather is necessary for the production of sugarcane. Drought conditions can cause damage to sugarcane farmers. Moreover, wet weather can come in the way of harvesting the sugarcane crops, which in turn would become a hurdle of sugar getting to the market. Adverse weather can also bring down the sugar content in the cane and have an impact on the sugar price.