Sugar production down, price up to 20-year high

World sugar production is short of demand by over 14 million tons this year, due primarily to supply interruptions in India and Brazil. The price of refined sugar is expected to reach a 20-year high of 30 cents per pound on the commodity market.

The world sugar market price has risen to the highest level in over 20 years, according to a report from The Financial Express. The price increase is mainly due to supply problems in Brazil and India, the world's first and second largest sugar producers, respectively. The global supply of white, refined sugar is expected to exceed the demand by about 14.3 million tons (13.5 million metric tons)* this year. Businessweek is reporting that sugar futures are expected to reach over 30 cents per pound within the next six to 12 months. Bloomberg reported sugar closing at 27.79 cents per pound on Tuesday, January 5, 2010. India, who is also the world's largest consumer of sugar, has suffered from decreased production due to the lack of rain in what has been the mildest monsoon season since 1972. Brazil's problem has been too much rain in 2009 and also the increased use of its sugar in ethanol, resulting in too little supply. The 14.3 million tons of sugar represents a tremendous amount when placed in perspective. According to Bloomberg in a December 14, 2009, article, that much sugar is enough to make "about 386 billion cans of Coca-Cola". Annual global production from the 121 countries that produce sugar is approximately 120 million tons per year. The majority is made either from sugar cane, which makes up close to 70 percent of the total or sugar beets which makes up close to 30 percent of the global production. Bloomberg points out that beet growers in the European Union (EU), particularly France and Germany, have lobbied to be able to sell about a 500,000 ton surplus on the world market in light of the shortage. The EU limits were put into place partly as a price subsidy for the benefit of EU farmers and an export increase was already given in early November 2009. But EU farmers still would like to be able to sell more because of the world shortage and they still anticipate having a 500,000 ton surplus. Bloomberg says that, at this time, the EU still "has no plans to loosen export limits for now." * - One U.S. ton = 2,000 pounds and one metric ton = 2,205 pounds or 1,000 kg