Sugar prices hit a 26-year high, potentially increasing costs for candies and other products.
11/15
2013
International white sugar and raw sugar prices hit or neared their highest levels since the 1980s on August 3, driven by news of a significant production shortfall in India, which is expected to lead to substantial sugar imports. India's reduced production, coupled with a 16% decrease in China's sugar production during the 2008/2009 season, has also strengthened domestic sugar prices.
On August 3, Indian government officials stated that sugarcane planting area in India's largest sugarcane-producing state has shrunk by 14.3% due to drought, far exceeding expectations. A Morgan Stanley report indicated that "India being too dry and Brazil being too wet" will result in a global sugar deficit of 9 million tons in 2008/2009.
"Brazil is the world's leading sugar producer, with an annual output of 36 million tons. India is second, typically producing 28 million tons annually, but last year it only produced 16 million tons." Gao Wang, an analyst at Beijing Orient Agribusiness Consulting Co., Ltd., said that since India is a major sugar consumer, its reduced production will necessitate imports from other sugar-producing countries, driving up global sugar prices.
Figures provided by Gao Wang show that China imported 95,000 tons of raw sugar from India last year, accounting for 18% of China's raw sugar imports. 60,000 tons of white sugar were imported from India, representing 25% of total imports. It is anticipated that China's sugar production this year will be 12.4 million tons, with consumption at 13 million tons, resulting in slightly higher imports than last year.
According to the Ministry of Industry and Information Technology, China's sugar production in the first five months of this year was 9.7 million tons, down 12.9% year-on-year, due to weather conditions. Statistics show that by mid-June, the 2008/2009 sugar production season had concluded with a total output of 12.43 million tons, a decrease of 2.38 million tons compared to the previous season, representing a 16% year-on-year decline.
The rise in sugar prices has dealt a blow to downstream food companies that use large quantities of sugar. Gao Wang said that the most affected industries include confectionery, beverages, biscuits, dairy products, and cakes.
----Excerpt from "China Candy Magazine"
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