Sugar cane depends on tropical weather to grow well, and not all countries are producing expected crops. Image: Wikimedia Commons

In yet another record gain, sugar prices hit a 30-year high on Tuesday and went up even more Wednesday. The sugar prices 30-year high comes after last year’s double in sugar prices. The volatility in the sugar market means more than just increasing consumer prices, though.

Sugar prices 30-year high

Sugar prices reached a record 30-year high of 30.64 cents per pound on Tuesday. Then Wednesday, the sugar prices 30-year high jumped again to 34.77 cents per pound. These prices apply to sugar expected to be delivered and refined in March. Expectations of shortages thanks to unpredictable weather and smaller-than-expected crops in Brazil, as well as increased demand, are driving the prices up.

Volatility in commodity and sugar prices

Commodities, such as sugar, cotton, coffee and cocoa have experienced extreme volatility in the last few years. In the last year, sugar has been as low as 14.35 cents per pound and as high as 30.64 cents per pound. Cotton futures have set 130-year highs, and coffee recently set a 13-year price high. Extreme weather in many commodity-growing countries has played a major part in this volatility. Governmental policies in countries such as India are also contributing to the volatility. This volatility affects everyone from the growers who sell their crops to the final consumer price paid, two to nine months later, when the commodity finally reaches the market.

Increased demand for sugar

The increased demand for “real” sugar has been playing a part in the sugar prices 30-year high. The U.S. department of agriculture has recently released a report showing that demand for high fructose corn syrup, a popular alternative to sugar, has dropped 11 percent this year. Corn, the basis of high fructose corn syrup, is also at historically high commodity prices of about 10.72 cents per pound — still three times less expensive than sugar. In the United States, many companies are choosing to replace HFCS with sugar. However, food manufacturing operations in Mexico and other sugar-producing countries are opting to use the less-expensive corn option. This, combined with weather, tariffs and governmental factors, likely means that the price of sugar and other agricultural products will continue the volatile rise-and-fall.

Sources

Index Mundi
Sydney Morning Herald
Bloomberg
Financial Times