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August 17, 2009

WORLD: Sugar hikes could cause consumer price rises – analyst

Increases in the price of sugar on the global commodities market could result in higher food costs for consumers, a leading analyst has warned.

Increases in the price of sugar on the global commodities market could result in higher food costs for consumers, a leading analyst has warned.


Luke Chandler, director of agri commodity markets research at Rabobank International, told just-food that, with international sugar prices up 115% from the start of the year, food companies are likely to try and recoup some of these costs by hiking consumer prices.


“We’ve certainly seen a number of major food companies raising concerns over higher sugar prices. They could look to pass this cost through to consumers,” he said.


According to Chandler, higher sugar prices are the result of concerns over a potential shortfall in supply due to adverse weather in India and Brazil – the world’s two largest sugar producers.


Low rainfall during India’s monsoon season have caused a lower sugar yield, while wet conditions in Brazil have reduced the amount of sugar milled in the country.


Rabobank is currently forecasting Indian sugar production of 14.5-15m tonnes, 45% below the 26.5m tonnes produced in 2007/08.


“India is the world’s second largest sugar producer and largest consumer. The setbacks in India’s monsoon season have impacted the sugar crop. That’s going to result in India becoming a sugar importer next year,” Chandler warned.


In the US, food companies including the likes of Kraft Foods, General Mills and Hershey, have warned that the market could face sugar shortages.


The coalition of food manufacturers has called on the US Department of Agriculture to increase the levels of tariff-free import quotas in order to alleviate the situation.


However, Chandler said that the US market was – to an extent – protected from the volatility in global prices due to “protectionist” tariffs. The majority of sugar used in the US is produced domestically or imported from Mexico.


Last week, the American Sugar Association dismissed the food companies’ concerns as “political shenanigans”.


Phillip Hayes, director of communications at the American Sugar Alliance, told just-food: “Manufacturers want to increase imports to force down their ingredients costs.”


“We have lots of sugar,” he insisted.

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