Sugar prices skyrocketing after weather damages crops in Asia

Skyrocketing sugar prices left Ishaq Abdulraheem with few choices. Increasing the cost of bread would mean declining sales, so the Nigerian baker decided to cut his production by half.

For scores of other bakers struggling to stay afloat while enduring higher costs for fuel and flour, the stratospheric sugar prices proved to be the last straw, and they closed for good.

Sugar is needed to make bread, which is a staple for Nigeria's 210 million people, and for many who are struggling to put food on the table, it offers a cheap source of calories. Surging sugar prices — an increase of 55 per cent in two months — means fewer bakers and less bread.

“It is a very serious situation,” Abdulraheem said.

Sugar worldwide is trading at the highest prices since 2011, mainly due to lower global supplies after unusually dry weather damaged harvests in India and Thailand, the world's second- and third-largest exporters.

This is just the latest hit for developing nations already coping with shortages in staples like rice and bans on food trade that have added to food inflation. All of it contributes to food insecurity because of the combined effects of the naturally occurring climate phenomenon El Nino, the war in Ukraine and weaker currencies. Wealthier Western nations can absorb the higher costs, but poorer nations are struggling.

The United Nations Food and Agriculture Organization is predicting a 2 per cent decline in global sugar production in the 2023-24 season, compared with the previous year, translating to a loss of about 3.5 million metric tons (3.8 million U.S. tons), said Fabio Palmeri, an FAO global commodities market researcher. Increasingly, sugar is being used for biofuels like ethanol, so global reserves of sugar are at their lowest since 2009.

Brazil is the biggest sugar exporter, but its harvest will only help plug gaps later in 2024. Until then, import-dependent countries — like most of those in sub-Saharan Africa — remain vulnerable.

Nigeria, for instance, buys 98 per cent of its raw sugar from other countries. In 2021, it banned imports of refined sugar that ran counter to a plan to build up domestic sugar processing and announced a $73-million project to expand sugar infrastructure. But those are longer-term strategies. Abuja traders like Abba Usman are facing problems now.

The same 50-kilogram (110-pound) bag of sugar that Usman bought a week ago for $66 now costs $81. As prices rise, his customers are dwindling.

“The price keeps increasing every day, and we don’t know why,” Usman said.

It's partly due to the El Nino, a natural phenomenon that shifts global weather patterns and can cause extreme weather conditions ranging from drought to flooding. Scientists believe climate change is making El Nino stronger.

India endured its driest August in over a century, and crops in the western state of Maharashtra, which accounts for over a third of its sugarcane production, were stunted during the crucial growing phase.

India’s sugar production is likely to decline by 8 per cent this year, according to the Indian Sugar Mills Association. The world’s most populated nation is also the biggest consumer of sugar and is now restricting sugar exports.

In Thailand, El Nino effects early in the growing season altered not just the quantity but also the quality of the harvest, said Naradhip Anantasuk, leader of the Thailand Sugar Planters Association. He expects only 76 million metric tons (84 million U.S. tons) of sugarcane to be milled in the 2024 harvest season, compared with 93 million metric tons (103 million U.S. tons) this year.

A report by U.S. Department of Agriculture predicted a 15 per cent dip in output in Thailand in October.

Thailand reversed a hike in sugar prices within days, imposing price controls for the first time since 2018. Anantasuk said this would discourage farmers from growing sugar by capping their income.

“It’s like preventing the industry from growing, preventing an open competition,” he said.

Wholesale prices had been allowed to rise to help farmers cope with higher costs — partly due to government demands that they not burn their fields, which makes harvesting cheaper but envelops much of Thailand in heavy smog.

Looking ahead, Brazil's harvest is forecast to be 20 per cent bigger than last year's, said Kelly Goughary, a senior research analyst at the agriculture data and analytics firm Gro Intelligence. But since the country is in the Southern Hemisphere, the boost to global supplies won't come until March.

This is because of favourable weather earlier this year in Brazil along with an increase in areas where sugarcane was planted, according to the USDA.

The next few months are the greatest concern, said the FAO's Palmeri. Population growth and rising sugar consumption will further strain sugar reserves, he said.

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