Source: Ukragroconsult (Ukraine)
Sugar prices are rising in the face of fires and drought in the fields of Brazil’s largest sugar producer, threatening to drive up the price of sweets and desserts.
Raw sugar futures posted their biggest weekly gain in 16 years as traders assess the extent of crop damage caused by fires and a heat wave in the country.
The state of São Paulo, part of Brazil’s main Center-South region, has seen a record number of fires this summer due to a lack of moisture. This has led to damage to the roots of the sugar cane, which could force farmers to replant or reduce yields in the coming season. In addition, there has been a prolonged drought since October last year, which has led to lower yields.
While it takes a while for price changes to trickle down to stores, the recent rise in sugar prices has led to a sixth consecutive annual increase, which continues to put pressure on food manufacturers.
Trading firm Wilmar International Ltd. lowered its forecast for sugar production in the Centre-South region, citing a series of “unusual and prolonged weather events.” In a statement on its website X, Wilmar said fires have affected up to 450,000 hectares (1.1 million acres) of sugarcane in the past month.
“The reduced production outlook for the Center-South region of Brazil has been a key underlying factor,” said Mark Bowman, senior global market analyst at ADM Investor Services. “Drought conditions and the possibility of lower production have been known for some time, but recent reports have heightened concerns.”
The jump in sugar prices coincides with a sharp rise in the price of other crops such as coffee and cocoa and is particularly weighing on beverage and dessert counters. The weather-related price hikes come at a time when consumer goods manufacturers are already facing the challenge of enticing customers back to some premium food brands after a period of high inflation and tight budgets.
The difficult conditions have led to leadership changes in the food industry. The CEO of Nestle SA, Mark Schneider, left the Swiss manufacturer of KitKat and Nescafé abruptly last month. Laxman Narasimhan also recently lost his post as CEO of Starbucks Corp. after less than two years in office.
The most traded raw sugar futures rose 3.8 percent in New York. It is on track to gain nearly 16 percent this week, which would be its biggest weekly gain since August 2008.
Forecasters at Maxar Technologies Inc. are predicting mostly dry conditions in Brazil for the next six to 10 days, although “light rain” is possible in south-central and southern areas on Friday and Saturday.
Better weather conditions in October will probably not benefit the current crop, but perhaps the next one,” says Wilmar.