Features International Sugar Journal

Reflections on the current sugar market dynamics

Undoubtedly, the Covid-19 pandemic and climate change have impacted the fortunes not only in the sugar industry. The frequency of extreme hot weather and record temperatures and rainfall has increased worldwide due to global warming. The significant drop in cane production in Brazil this year due to drought and frosts is a case in point. As for 2022, it is the case of watch the space and be only surprised if an extreme weather event does not impact output in a major sugar cane/sugarbeet producing region/s. Indications are that there is consensus that this year’s weather problems in Brazil will also curtail the production recovery in 2022/23. Evidently, such a scenario could give the market further upside potential.

According to FO Licht, a deficit of 3.36 million tonnes raw value (mtrv) is forecast for 2021/22, following the deficit of 3.71 mtrv in 2020/21. As a result, FO Licht puts stocks to consumption ratio at 35.52% for 2021/22 after already falling to 38.2% in the current season from 40.2% a year ago. If realised, this would push the ratio to the lowest level since 1994/95! With the global stock consumption ratio being a good indicator of the future direction of sugar prices, the industry will continue to enjoy high sugar prices in the foreseeable future.

The Covid-19 resulted in world market prices plummeting to a 13-year low on 27 April 2020 – US¢ 9.42 /lb. Prices over the remainder of 2020 recovered to the pre-Covid level of US¢ 15/lb and have risen strongly in 2021, reaching well above the 10-year average level. Prices peaked over US¢ 20/lb – not seen since early 2017. At a recent webinar, Lindsay Jolly, ISO, indicated that in 2020, ISA daily price averaged US cents 12.84/lb, while that in 2021 was US¢ 17.23/lb. However, raw sugar prices could rise to US¢25 a pound in the event of crude oil topping US$100 a barrel, according to Karim Salamon, Sugar Analysis Head, Wilmar Sugar, speaking at a global webinar on sugar. “If crude oil prices touch US$100 a barrel and if (Brazilian state-run oil company) Petrobras aligns its products’ prices with global rates, then ethanol parity could rise to 22-23 cents. In that case, sugar should be at a premium to ethanol and rule close to 25 cents.”

Bullish/bearish scenarios on sugar price development in 2022



• China’s import surge takes a dive

•      Vaccination rollout accelerating, bringing normality

•      Restoration of supply chains easing inflated prices

•      Recovery in sugar production in Thailand

•      Speculators dumping long positions

•      Clement weather

•      New build factories and capacity expansion projects impacting output


•      Adverse impact of weather on output – climate change impacts

•      Surging global crude oil prices fostering expansion in ethanol production in Brazil)

•      Sugar consumption rebounding in emerging economies

•      More cane diverted to ethanol production in India

•      Increased production costs (e.g. fertilisers) due to supply chain disruptions

•      Sugar stocks dwindling as sugar deficits rise

•      Indonesia becoming a leading importer

With some semblance of normality returning, consumption is expected to bounce back in 2021/22, rising by 2.25% or over 4 mtrv, following a decline by 0.09% or 155,000 mtrv in the previous year, notes FO Licht. According to a recent report1 by the OECD, Global sugar consumption is projected to grow at around 1.4% p.a., reaching 196 million tonnes by 2030. During the height of the pandemic, consumption decline was quite significant. In the emerging and developing economies, median household income is significantly lower than their counterparts in the developed economies. OECD points to “income gains and urbanisation in developing countries” as the key driver for consumption growth. It expects sugar consumption in Asia “to grow the most (in absolute terms) and to represent more than half of global consumption by 2030, reflecting higher demand in sugar-rich confectionery products and soft drinks,” whereas “in Africa, the increase in consumption is expected to be driven by population growth”. In developed countries, OECD forecasts decline “total sugar consumption…….in the next decade, a reflection of concerns about its negative effects on health,” bolstered by sugar tax discouraging consumption.

The sugar market is generally a bear market with the odd bull spike. So the question is, will climate change impact begin to play havoc with production on a regular basis?



1 OECD/FAO (2021), OECD-FAO Agricultural Outlook 2021-2030, OECD Publishing, Paris, https://doi.org/10.1787/19428846-en