Emerging Markets Sweet Tooth is Driving up Refined Sugar

The world is coming back to sweets and desserts as more Covid-19 lockdowns lift, especially in emerging nations, and it’s causing a spike in prices for refined sugar that can be delivered as soon as possible.

Importing countries like Pakistan and Sudan are purchasing the sweetener on world markets again after a long period of absence. That’s driving up premiums for white sugar futures for delivery in December, which traded at $8 per tonne over its March counterpart, a record spread between the contracts.

The soaring spot prices for sugar, one of the cheapest calories, could add to global concerns over food inflation amid similar jumps in agricultural commodities from wheat to coffee.

“We feel that there is a bounce in the demand which is materializing in the London market," said Wilmar Sugar head of analysis Karim Salamon, citing the spreads, at the Platts European Sugar Conference on Tuesday.

Sugar has already seen a rally because of frosts and drought in Brazil, the top producer, and flagging exports from India, a major shipper. Futures in London touched a four-year high earlier this month.

While refined sugar markets are seeing higher prices, raw sugar in New York has been dipping because of improved prospects for the Brazilian crop.

Emerging markets have been suffering from tight credit, so now “those markets are now slowly coming back, in part because their stocks have been drawn down and they need them back," ED&F Man head of commodities research Kona Haque said at the conference. 

Europe is another net importer seeing renewed, post-lockdown demand for sugar. 

The EU is “absorbing the rally in the world market," and local prices are rising to meet that of imports, said Daniel Kerkhof, president of the European Association of Sugar Traders.

(Except for the headline, this story has not been edited by Scrabbl staff and is published from a syndicated feed.)