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Global Sugar Prices See Surge As Supply Shrinks From Asia, Oil Prices Rise

Sugar prices have been experiencing a global surge due to the reduced supply coming in from India and Thailand, as the countries suffer from poor weather conditions, the Nikkei Asian Review reported Friday.

Benzinga · 01/24/2020 10:07

Sugar prices have been experiencing a global surge due to the reduced supply coming in from India and Thailand, as the countries suffer from poor weather conditions, the Nikkei Asian Review reported Friday.

Shrinking Supply

The recent surge in oil prices as tensions between the United States and Iran heightened also led to sugarcane being diverted to create biofuel, according to the Nikkei, resulting in a further dip in supply.

The global sugar production in the past 12 months leading to September could fall 4.2% year-on-year to 179.25 million tonnes, according to the Agricultural and Livestock Industries Corp. (ALIC) data reported by the Nikkei.

The supply from India, which is the second-largest producer of the sweetener next only to Brazil, is expected to drop 19.8% to 12.39 million tonnes, as a draught in 2018 followed by flooding in 2019 in key sugarcane growing states of Maharashtra and Karnataka reduced the supply to a three-year low.

It was India's extensive sugar surplus in previous years that led to a global dip in sugar prices.

Elsewhere in Thailand, the world's third-largest sugar-producing country, the supply could plummet by 19.8% to 12.39 million, per the ALIC data, as extensive rains, followed by drought, hit its northeastern regions.

The previously drop in sugar prices also took many farmers away from cane farming, and with Thailand's national currency Thai Baht rising against the U.S. dollar, exporting has become less lucrative, a local official told Reuters July last year.

The sugar production in China is also expected to drop 5.2% at 11.03 million tonnes, the Nikkei reported.

Price Action

The U.S. Sugar Futures for March closed at $14.54 on Thursday, up 19.1% compared to three months earlier. The London Sugar Futures closed at $403.8, up 20.3% from three months ago.