It may be the most vilified ingredient on the planet – but global production of sugar is expected to fall short of demand for the second year in a row, according to Informa’s Agribusiness Intelligence vertical.
The deficit in production will lead to price rises, exacerbated by the ‘stark effect’ that weather patterns have had on production, Informa said.
The 2016-17 sugar year will be the last when the output of European Union (EU) countries will be constrained by the current system of production quotas, and when minimum prices for sugar beet will be removed.
Given the uncertainty over potential low prices, this could mean farmers switch to alternative crops, creating instability in the market.
Undeterred: demand for sugar will outstrip supply this year, Informa said, despite the sweetener suffering a rapid shift in perception. The UK, Ireland and South Africa are all waiting for high-profile sugar taxes to take effect.
In China – currently the world’s fourth largest producer and third largest consumer of sugar – cane production is wavering in the face of drought, poor prices and rising costs, despite government incentives to encourage growers.
And in India, unfavourable weather has resulted in lower cane output, but weak domestic demand means that the need to import isn’t expected as a necessity.
But despite the bleak outlook, the global picture is slightly more positive than recent years, with prices beginning to rebound. It is the first year that sugar prices have recorded healthy gains, with a combined loss of 65% in the price of sugar between 2011 and 2015.
Christoph Berg, managing director of FO Licht, part of Informa’s Agribusiness Intelligence vertical, commented: “After five lean years, it seems as if sugar producers can look forward to a longer period of firm prices in 2017.
“While sugar lost 65% of its value between 2011 and 2015, the sweetener has made an impressive comeback since, reaching four-year highs in the process. How long before a new production boom will bring down prices again? The year ahead is full of questions, but the industry needs to keep abreast of changes as they happen to make informed decisions and weather this period of uncertainty.”
Earlier in the month, it was predicted that the global market for stevia – the most well-known alternative sweetener – would expand at a compound rate of 8% a year, reaching value sales of $565 million by 2020.
It is anticipated that, by 2020, stevia will account for 15% of the share of the global sweetener market.
© FoodBev Media Ltd 2017