The price of raw cane sugar has surged to 17.50 US cents per lb, from around 15.50 at the start of the year, owing primarily to concerns about possible drought damage to Brazil’s crop and higher crude oil prices. However, strategists at Capital Economics still expect the size of the global sugar market surplus to increase in 2021/22, which will weigh on prices.
Growth in global supply to outpace that of demand
“Despite the relatively high spot price of sugar, we still expect global sugar consumption to rise during the 2021/22 marketing year (May-April) to just over 174m tonnes, around 1.5% higher than the previous marketing year. At the same time, we expect demand to bounce back in the developed world as the partial return to office-based working is likely to boost the consumption of convenience foods, which typically contain more sugar than home-based cooking.”
“We forecast that the price of sugar will fall over the next eighteen months as growth in global supply outpaces that of demand. We anticipate that global production will rise by 2.3% in 2021/22 (USDA +3.2%) as the decline in drought-hit Brazil is more than offset by higher production in Asia and the EU.”
“We expect that the surplus in the global sugar market will rise in 2021/22. This surplus should boost global end-stocks and it is the primary reason why we forecast that the price of refined sugar will tumble to 14.50 and 13.50 US cents per lb by the end of 2021 and 2022, respectively.”