As per last year, this year recalled the truism that sugar operates in a bear market and is occasionally bullish when inclement weather significantly impacts output in key producing regions. Market fundamentals continue to weigh in on low sugar prices due to supply glut and faltering demand. In its recent outlook report for 2020, Rabobank noted that raw sugar prices this year have traded at between US¢10.18/lb and US¢13.4/lb. In his commentary piece, Alberto Peixoto1 notes that over Jan-Oct this year raw sugar price has been trading on average at US¢ 12.25/lb compared with US¢ 12.18, 15.56 and 18.42 in 2018, 2017 and 2016, respectively. Even though the forecast deficit of 5 million tonnes in 2019/20 suggests supply getting tighter, Rabobank is fairly cautious about any significant upturn in the market. Its forecast for raw sugar prices for the next year is US¢ 13.3 (Q1), 13.6 (Q2), 13.7 (Q3) and 14.0 (Q4). Few analysts will dispute the bank’s take. In spite of the throes of climate change, agricultural production and productivity levels have been stable or increasing largely due to improved crop management, access to productive cultivars and judicious use of capital inputs (e.g. fertilizers and crop protection chemicals). As yet, there is no indication of a significant switch from growers to alternate crops.
But the fall in demand in the recent past due to successful campaigns by health advocates demonizing sugar and some opportunistic governments slapping on tax (arguably more for fiscal reasons for treasury coffers than the subscribed health reason) is adversely impacting the industry. For decades, consumption growth was 2% annually. But it has fallen well below that now. Except for the emerging and developing economies in Africa and Asia, consumption has been fairly flat in other parts of the world. The global sugar industry has simply not been effective in countering the charlatans who selectively misuse science to propagate half-truths about sugar, and those medical experts who have offered nuanced views have not been heard in mass media. The Annals of Internal Medicine, a journal from the American College of Physicians stable, recently reported2 that obesity rates in China have tripled over the past 10 years. Yet the per capita sugar consumption in the country is only 12 kg, around one-third of that in the West. As Courtney Gaine, President of Sugar Association (America) has noted in her presentations at various events, the issue of obesity should be framed within the overall caloric intake – isolating one nutrient is simply not helpful. But sugar is a low-hanging fruit that can be easily demonized in 24/7 media where perception is much easier to convey than scientific truth.
Sugar smuggling is a perennial problem in the industry. For more than a few emerging and developing economies, smuggling has a severe impact on their local industries. Alas, those surplus producers whose sugar reach these countries, aided often by corruption, care less for the hurt they cause when they are so desperate to move their stock. With China’s crackdown on smuggling, the issue has come to the fore. Recently, Suedzucker in Moldova had to mothball one of its sugar factories due to smuggling impacting demand of locally produced sugar which could not compete in the local market. Fearing closure of the only sugar factory in the country from illegal sugar imports, Burkina Faso imposed a ban on all imports. This had the desired impact – locally produced sugar got sold in the local market.
The most distressing news piece during the year was from India. Women cane cutters in the Beed district of Maharashtra were forced to undergo sterilization or a hysterectomy so they do not take a break from cutting when they are menstruating. But according to a Reuters report3, what really lay behind this action was to prevent the women from getting “pregnant from repeated [sexual] abuse by landlords and middlemen who enslave them through debt bondage.” As Nirja Bhatnagar, regional manager at ActionAid in Mumbai pointed out “There is no human rights violation worse than having to remove your uterus so you can enter an informal economy that does not care for you.” It is deplorable that the cane industry supports such violations against the vulnerable. Very much hope that the Indian sugar industry will act to put an end to this unconscionable practice.
1 Alberto Peixoto (2019) The bitter side of sugar, but consumers are not complaining! ADMISI Ghost in the machine. November/December 26-27.
2 Xiao Zhang et al (2019) Geographic variation in prevalence of adult obesity in China: Results from the 2013–2014 National Chronic Disease and Risk Factor Surveillance. Annals of Internal Medicine – Letters, 29th October 1-3, DOI:10.7326/M19-0477