Sugar as a commodity is definitely enjoying the sweet smell of success - we can't get enough of the stuff.
But as demand continues to rise, supply is being hit by a series of crop failures, EU quotas and competition with biofuels - and the price just keeps going up.
Global sugar output in 2008/09 could fall by a record 20 million tonnes (-12%) year-on-year to 150.6 million tonnes. Traders are speculating that crop failures will change India - the world's largest sugar consumer - from a sugar-exporting nation to a net importer.
India's domestic sugar production is on course for a record decline in the current 2008/09 season, with an estimated 44% fall to 14.7 million tonnes, well below the country's current consumption of about 23 million tonnes a year. This has been blamed on a combination of bad weather, reduced fertiliser and pesticide use and farmers switching production to what appeared to be the more profitable grain crops during the commodity boom last year.
Demand from importers is exceeding the exportable supply. When the world price of white sugar recently rose above $450 a tonne, it marked a 42% rise since the start of this year, taking the price up to its highest level in nearly three years. This is a feat very few other commodities can at present claim, despite the recent surge in crude oil prices (currently up 44% since the start of this year), which may be heralding a general re-run in commodity price inflation.
The UK produces about 1.2 million tonnes of sugar each year - about 1% of total global production. The EU sugar regime as a whole has long been plagued with reported overproduction and demands for reform. The EC considers it to be a success that quota and production levels have fallen despite European production being aided by good growing conditions this season. Formerly an exporter, the EU is now a net importer.
As well as being the world's most plentiful sweetener, sugar has also been of growing interest for manufacturers of biofuel - putting still more pressure on price. Brazil is the world's largest sugar producer and exporter, providing 20% of global refined sugar and almost half of the world's ethanol for fuel. Brazil's 2009/10 projected production of sugar cane is 605 million tonnes, up 7% on the previous year, from which an estimated 28.5 billion litres of ethanol will be produced, along with 36.9 million tonnes of raw sugar.
For the next few months, the sugar market is expected to be bullish overall. At present, the International Sugar Organisation predicts a 7.8-million-tonne deficit in 2008/09 and a second consecutive market deficit of 4.5 to 5 million tonnes in 2009/10.
So, around the world, retail prices are expected to rise to match the surge in the cost of sugar in the wholesale market. The tightness of supply is worrying confectioners - and presumably all those with a sweet tooth.
But as demand continues to rise, supply is being hit by a series of crop failures, EU quotas and competition with biofuels - and the price just keeps going up.
Global sugar output in 2008/09 could fall by a record 20 million tonnes (-12%) year-on-year to 150.6 million tonnes. Traders are speculating that crop failures will change India - the world's largest sugar consumer - from a sugar-exporting nation to a net importer.
India's domestic sugar production is on course for a record decline in the current 2008/09 season, with an estimated 44% fall to 14.7 million tonnes, well below the country's current consumption of about 23 million tonnes a year. This has been blamed on a combination of bad weather, reduced fertiliser and pesticide use and farmers switching production to what appeared to be the more profitable grain crops during the commodity boom last year.
Demand from importers is exceeding the exportable supply. When the world price of white sugar recently rose above $450 a tonne, it marked a 42% rise since the start of this year, taking the price up to its highest level in nearly three years. This is a feat very few other commodities can at present claim, despite the recent surge in crude oil prices (currently up 44% since the start of this year), which may be heralding a general re-run in commodity price inflation.
The UK produces about 1.2 million tonnes of sugar each year - about 1% of total global production. The EU sugar regime as a whole has long been plagued with reported overproduction and demands for reform. The EC considers it to be a success that quota and production levels have fallen despite European production being aided by good growing conditions this season. Formerly an exporter, the EU is now a net importer.
As well as being the world's most plentiful sweetener, sugar has also been of growing interest for manufacturers of biofuel - putting still more pressure on price. Brazil is the world's largest sugar producer and exporter, providing 20% of global refined sugar and almost half of the world's ethanol for fuel. Brazil's 2009/10 projected production of sugar cane is 605 million tonnes, up 7% on the previous year, from which an estimated 28.5 billion litres of ethanol will be produced, along with 36.9 million tonnes of raw sugar.
For the next few months, the sugar market is expected to be bullish overall. At present, the International Sugar Organisation predicts a 7.8-million-tonne deficit in 2008/09 and a second consecutive market deficit of 4.5 to 5 million tonnes in 2009/10.
So, around the world, retail prices are expected to rise to match the surge in the cost of sugar in the wholesale market. The tightness of supply is worrying confectioners - and presumably all those with a sweet tooth.
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