Sugar Shortages Loom as Supply Gets Sticky
Logistical holdups at ports in Brazil combined with poor sugar crops in other major sugar-producing nations is stretching supply of the crop.
Sign up for smart news, insights, and analysis on the biggest financial stories of the day.
If you’re still coming down off a Halloween-induced sugar high and gearing up for your next, we have some bad news for you.
Logistical holdups at ports in Brazil, the world’s largest producer of sugar, combined with poor sugar crops in other major sugar-producing nations, is stretching supply of the precious crystals to a worrying degree — and environmental factors could mean things will get worse before they get better.
This year hasn’t been kind to sugar farmers. Dimitri Varsano, co-head of sugar trading for soft commodities trader Sucden, told Reuters last week that bad weather has affected a wide swath of sugar producers including India, Mexico, and the US. India, the world’s second-largest producer, responded by placing tighter restrictions on sugar exports to try and keep domestic prices from getting too hyper (inflated).
Brazil, however, has had a bumper year for sugar production, with crops hitting record highs. The problem is it can’t shift its mountains of sugar fast enough to counter the deficit from other producers, driving sugar prices up:
- Sugar wasn’t the only crop in abundance this year: Brazil’s harvest of grain and oilseed is set to break records. Unfortunately, all those various crops are jostling for space onboard cargo ships.
- Bloomberg reports that around 70 vessels are currently waiting 20 days to load what’s usually a month’s worth of sugar exports at Brazilian ports.
An Unsweetened Pill: The price of sugar hit a 12-year high last week, and while Varsano told Reuters the tightness in the market caused by logistical bottlenecks is already priced in, the price of sugar could still tick up as Brazil heads into the rainy season. On top of that, since Varsano gave his comments a fire broke out at a major Brazilian port, forcing it to shut down until November 4. Soon your designated snack drawer (everyone has one of those, right?) could be worth a lot more…