New York City – In a significant surge, sugar prices have escalated by 55% in the last two months, hitting their highest level since 2011. The spike is attributed to a decrease in global supplies, compounded by dry weather adversely affecting harvests in key exporting nations.
According to World Economic Forum, India and Thailand, ranking among the top sugar exporters globally, have seen their harvests severely impacted by a dry spell, further exacerbated by the El Nino phenomenon which is known to disturb global weather patterns. This situation has left the world with less than 68 days of sugar reserves available, the lowest stockpile since 2009, and has driven prices to levels not seen in over a decade.
The impact is felt acutely by businesses and consumers, particularly in developing countries. For example, in Nigeria, where sugar is a critical ingredient in the diet, baker Ishaq Abdulraheem has been compelled to halve his bread production due to the soaring sugar costs. The strain has been so severe that many Nigerian bakers have been forced to shutter their businesses altogether.
The global supply deficit, precipitated by climatic anomalies and lower harvests in India and Thailand, has had cascading effects on food inflation and food security, particularly in developing nations already grappling with challenges such as the war in Ukraine and currency devaluations. While more affluent countries can better absorb these price hikes, poorer nations face dire consequences.
Fabio Palmeri, a researcher at the United Nations Food and Agriculture Organization (FAO), forecasts a 2% drop in global sugar production for the 2023-24 season, which translates to a significant reduction of about 3.5 million metric tons. Concurrently, there’s an increasing trend of sugar being diverted for biofuel production, which further strains the available supplies for consumption.
Brazil, the leading sugar exporter, is expected to help alleviate the shortage with its harvest projected for later in 2024. However, until then, countries that depend on imports, especially those in sub-Saharan Africa, are particularly vulnerable to supply disruptions.
In Nigeria, almost all the raw sugar is imported, and recent measures to bolster domestic sugar processing are seen as long-term strategies that do not address the immediate crisis. Traders in Abuja, like Abba Usman, are already feeling the pinch as sugar prices continue to climb, impacting both their businesses and their customers.
The El Nino effect has not only reduced the quantity of sugar harvests but also affected the quality, as observed in Thailand. The U.S. Department of Agriculture has noted a significant anticipated decline in Thai sugar production. In response, Thailand has imposed price controls to prevent further price escalations, a move that some argue may disincentivize farmers from growing sugar cane.
As the world navigates these tumultuous months, the FAO’s Palmeri highlights the concerns over population growth and increased sugar consumption that could place additional pressure on the already strained sugar reserves. The situation underscores the intricate balance between agricultural production, climate phenomena, and the critical need for strategic planning to ensure food security globally.