Market prices for white sugar in the world have reached their highest level over the past 11.5 years. On Wednesday, April 12, during trading on the London ICE stock exchange, the value of May contracts for the supply of a sweet product rose by 0.6% to $ 706.9 per ton. The last time such a high value could be observed in October 2011.
In total, since the beginning of 2023, sugar in the international market has risen in price by 27.5%. Experts attribute the observed dynamics to the appearance of news about the reduction in the supply of goods from India, Pakistan, Thailand and China.
"The production of raw materials in these countries is declining due to both climatic and economic reasons. The global sugar balance is a dynamic process, and a decrease in production by at least one of the major market players always leads to price fluctuations, "Evgeny Ivanov, a leading expert at the Institute for Agrarian Market Studies (IKAR), explained to RT.
In addition, to a certain extent, sugar quotes could be affected by the rise in oil prices observed in recent days, the analyst did not rule out. So, after the decision of the OPEC + alliance to reduce hydrocarbon production, the cost of energy raw materials of the benchmark Brent brand has grown by more than 9% since the beginning of April and is now near $ 87 per barrel.
According to Yevgeny Ivanov, since the 1970s, with the increase in oil prices and, as a result, an increase in the cost of gasoline, a number of countries have begun to more actively use sugar cane for the production of ethanol, a cheaper type of fuel. In this case, the food market may lose the volume of sugar, which ultimately leads to an increase in the cost of the product.
"Such measures are sometimes resorted to by the countries of Western Europe, they have the appropriate factories for this. Nevertheless, it is worth noting that at the moment oil prices are still at a relatively low level, so the ethanol factor in the sugar market is not the main one now, "Ivanov added.
With a large margin
It is curious that against the background of the global rise in price of sugar, its cost on Russian shelves shows a more restrained dynamics. According to a report published on Wednesday by the Ministry of Economic Development of the Russian Federation, since the beginning of 2023, retail prices for a sweet product on average in the country have fallen by 0.25%.
The key reason for the cheapening of sugar in Russia could be its overabundance in the domestic market. This opinion was shared with RT by Oksana Lukicheva, an analyst on commodity markets at Otkritie Investments.
"This year we expect another increase in the area of crops and production. The country will form a surplus of about 2 million tons of sugar, which will need to be exported. This, in turn, contributes to lower prices," Lukicheva explained.
According to the Union of Sugar Producers of Russia, by the beginning of April 2023, the total inventories of the sweet product in Russia exceeded 3 million tons, which is about 13.2% more compared to the same level in 2022. In addition, as of April 4, 120 thousand hectares of sugar beet were sown in the country, which was 10% higher than last year's values.
"In total, in 2023, the area of sugar beet crops is expected to be 1.5% higher than last year and will amount to 1.042 million hectares.
At the moment, domestic demand for sugar in Russia is provided by 103.2%, while to achieve food security, the figure should be at least 90%. At the end of March, Prime Minister Mikhail Mishustin said this during a speech with the annual report of the government in the State Duma.
As the head of the Cabinet of Ministers recalled, back in 2022, against the background of unprecedented Western sanctions against Moscow, many were worried that products could disappear from store shelves. Nevertheless, such a scenario was avoided, Mishustin emphasized.
"Our agrarians did not disappoint ... The level of food security in Russia is one of the most reliable in the world. With an excess, we provide domestic demand with grain, sugar, vegetable oil, meat and fish," the Prime Minister added.
- RIA Novosti
- © Vladimir Trefilov
As Natalia Milchakova, a leading analyst at Freedom Finance Global, told RT, usually the growth of world prices for raw materials affects the cost of food in Russia with a difference of several months. Thus, the consequences of the current rise in the price of sugar in the global market ordinary consumers can see in the summer. However, the effect is unlikely to be sensitive, the expert believes.
"Traditionally, summer and early autumn in Russia are the season of deflation. Since there is no rush demand for sugar and other essential products in the country today, it can be assumed that there will be no significant increase in sugar prices this year at all. According to our estimates, by the end of 2023, the dynamics of retail prices may change from an increase of about 0.5% to a decrease of 0.7-0.8%," Milchakova suggested.
At the same time, against the background of rising world prices and a decrease in exports from India and Pakistan, Russia may return to Central Asia with the supply of sugar and derivative goods, Yevgeny Ivanov believes. In particular, according to him, Moscow is able to increase shipments of products to Tajikistan, Turkmenistan, Uzbekistan, Kyrgyzstan and Kazakhstan.
"We can deliver goods to these countries by rail. Deliveries in this way are convenient and inexpensive for our companies," the expert concluded.