The term “sugarflation” could soon become part of the global lexicon.
Everything from candy and soft drinks to baked goods are likely to become more expensive in the second half of 2023 – sugar prices have risen 42% since June 2022.
The El Niño weather phenomenon, which affects weather patterns and ocean temperatures, appears likely to impact sugar output in the months ahead.
“El Niño … is known for bringing heavy rainfall to some regions, such as Latin America and the southern U.S., while causing warmer weather and droughts in others, like Australia and south Asia,” said Nidhi Jain, specialist at The Smart Cube company, in a statement. Jain added:
“The intensity of the dry season that El Niño is set to influence this year could result in a 10- to 15 percent reduction in sugarcane yield globally.”
The steep rise in sugar prices over the past few months mainly stems from declining production in key producing nations like India, Thailand, and China during the 2022-23 sugar season. The shortage even led India – the second-largest sugar producer globally – to ban sugar exports to ensure domestic availability.
Major sugar-producing countries are forecast to see a decline in production in the months ahead.
“Looking specifically at Thailand, sugarcane output is expected to decline 21% in 2023-24 as a result of the weather,” Jain said. “Additionally, sugar prices are expected to surge in H2 2023 due to an anticipated demand from key sugar-consuming countries.”
Since April 2023, sugar prices in India have increased by more than 6% and they’re expected to continue to rise as demand from large consumer nations increases during the peak of summer.
The impact of “sugarflation” is already being felt across multiple industries. The wider confectionary industry is under increasing pressure to overcome the crisis.
“Small players, such as bakeries and hotels – who depend on sugar as a crucial ingredient for their products – are reportedly suffering diminishing profit margins,” Jain noted, “as they battle to absorb the increasing prices without passing them on to their clients.”
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