Soft drinks and sweets are set to become more expensive over summer as global sugar prices continue their race towards new highs.
Global sugar prices hit a six-year high in March, according to the FAO’s food index, and there is little sign of them easing after supplies tightened due to poor crops in Thailand and India, and unexpected weather patterns in Brazil.
It is likely prices will achieve new records before they start to fall at the end of the year, according to Rabobank’s April agri-commodities market report.
Sugar prices are already up by 24% since January, according to Mintec, heavily affecting the likes of creme eggs and other favourites over the Easter period.
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Soft drinks like Coca-Cola are up 22% in Morrisons in the past month, according to Assosia data, as are other sweet treats like rice pudding, breakfast cereals and digestives.
Manufacturers have used rising sugar prices to justify price hikes on shelves, said Inverto supply chain consultant Katharina Erfort, who added she was expecting more of the same in the coming months.
“The high sugar price does mean that sweets will become even more expensive, because confectionery manufacturers pass on the increased prices.”
Own-label granulated sugar is on average 4% more expensive than it was last month, with a 62% increase compared with last year, according to The Grocer’s KVI tracker.
“While it always comes down to individual pricing and price hedging strategies when dealing with suppliers, in the long run, market forces will drive the direction of pricing,” Erfort said.
Around half of the UK’s demand for sugar is met by domestic supply, while the rest is imported from places like Brazil and Egypt.
The rise in sugar prices in the UK and Europe over the past year has mainly been down to last year’s poor harvest because of drought conditions, compounded by higher prices for both energy and fertilisers.
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British Sugar recently announced that it would pay UK famers premium prices to harvest their beets early this year to combat the poor harvest.
But other factors have also contributed to the spike in prices more recently – global market sugar prices “rallied strongly” at the end of last month on fears of tightening supplies, after Egypt and Algeria announced export bans on sugar, as well as a weaker US dollar, said Mintec analyst Andrew Woods.
The sugar market was now “relying on Brazil to begin its new campaign in April without inclement weather disruptions”, Woods said, so was largely set to remain bullish.
Many other key commodities, including dairy, vegetable oils and cereals, have gradually decreased in price in recent months.
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