Shortage Driven By War, Climate, and Energy Prices Hike Cost of Sugar Worldwide

The world faces a sugar shortage as major sugar exporters are suffering through dry weather conditions that could be worsened by the El Niño weather pattern.Thailand is facing the biggest struggle with the weather. Its sugar exports are expected to drop at least 17 percent this year. Thai Sugar Millers Corp. tells Bloomberg that production is likely to fall below 10 million tons in the harvest season that begins next month. That is compared to the 12 million tons it produced last season.A Vesper research analyst says a number of other factors are pressuring the Thai sugar industry, including white leaf disease killing crops and fewer migrant laborers to harvest the sugar cane due to tensions with Cambodia and the civil war in Myanmar.The United States Department of Agriculture warned in April that Thailand was facing substantial headwinds due to rising cultivation costs. The department’s office of agricultural affairs at Bangkok warned that some smallholder sugarcane farmers could shift to alternative crops, causing a further shortage.The sugar export market is concentrated, with Brazil maintaining a dominant share followed by India, China, and Thailand. Brazil, with mills capable of alternating production, has shifted to using its sugar for ethanol as it deals with higher energy prices, CNBC reported. “When the price of oil increases, countries that produce ethanol from sugar have a higher incentive to produce more ethanol and export less sugar to the global market,” the American Sugar Alliance’s director of economics and policy, Rob Johansson, told the outlet.India, normally a top sugar producer, also has had a bad production season due to rains being 13 percent below average during the monsoon season that ends at the end of the month. The government is instead dropping import taxes to encourage imports this year.Drought and a hot summer have also impacted European sugar production. S&P Global Energy says European Union and United Kingdom sugar beet production will be the lowest in 11 years.All of the dominant sugar producers in Asia now face an extreme El Niño weather pattern that is developing over the Pacific. The condition can bring drier conditions during the growing season and then excessive rainfall during the harvest.The International Sugar Organization is predicting a global deficit of about 200,000 metric tons of sugar produced in the coming season. Covrig Analytics last month said the global sugar deficit could climb to 300,000 metric tons. International sugar prices have shot up 20 percent in the past month.The drop in sugar production and rise in prices comes as demand is increasing, although unevenly throughout the globe. The Organization for Economic Cooperation and Development says population growth, rapid urbanization, and rising disposable incomes are increasing demand in South and Southeastern Asia and Africa. Growth in those regions is expected to more than make up for declining sugar use in western economies over the next decade.

Shortage Driven By War, Climate, and Energy Prices Hike Cost of Sugar Worldwide

Shortage Driven By War, Climate, and Energy Prices Hike Cost of Sugar Worldwide

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