How the global sugar market works

Sugar is a global commodity that is produced, traded and consumed around the world. This commodity, derived from either sugarcane or sugar beet, takes many forms, from white crystallines to molasses.

In this blog, we take a closer look at sugar as a commodity and explain how the global sugar market functions and what factors influence sugar prices.

Sugar is traded on both the spot and derivatives markets on many exchanges worldwide.

The Sugar No. 11 New York futures contract is generally regarded as the benchmark for trading raw sugar globally and London for the White Sugar futures contract. Sugar is an agricultural commodity. As such, global exchange prices determine the selling price by producers and the prices paid by food and beverage manufacturers, and, ultimately, by consumers in shops.

Sugar commodities are produced from either sugarcane or sugar beet, with 80% of global output coming from sugarcane. This means there are sub-markets within the broader sugar market and regional variations due to tariff barriers, which affect market dynamics. For example, Europe is a major producer and consumer of sugar beet. High import tariffs on sugar produced outside the EU have been imposed to protect producers within the EU, which can distort the regional market. Such regional variations influence sugar prices and affect what Ragus pays its suppliers for white crystalline sugar and raw cane sugar.

Sugar is the second most politically traded commodity after oil. When oil prices rise and fall, sugar usually follows.

* Sugar is one of the world’s most traded and valuable agricultural commodities
* Sugar is the second most politically traded commodity after oil
* Global sugar consumption has risen to189 million tonnes in 23/24
* Brazil, followed by India, are the world’s leading producers and exporters of sugar and Brazil produces around 41 million tonnes of sugar annually
* Approximately 70 million tonnes of sugar are traded globally, outside of domestic production and consumption
* India is the largest consumer of sugar, with volumes reaching 28.5 million tonnes in 23/24

As of the end of February 2024, the current spot tradedprice of sugar is $0.49 per pound. Historically, sugar prices have remained relatively low with some significant rises and falls, often attributable to geopolitical events, global economic downturns or issues with supply and demand. Sugar prices peaked in November 1974 at $0.65 per pound due to severe shortages in supply. The chart below tracks raw sugar spot prices globally between 1970 and 2023.

Sugar price forecasts are partly determined by weather conditions and climate patterns such as El Niño. El Niño, which creates warmer atmospheric and drier growing conditions, typically affects countries like India, Thailand and Australia that produce high volumes of sugar. Poor weather forecasts, such as drought or flooding, may cause sugar prices to rise, while good weather forecasts tend to push prices down.

Four key factors tend to influence trends and prices in the global sugar market. These factors are closely linked, and are:

1) Supply and demand
If global production exceeds demand, there will be a surplus and prices will go down. Sugar production shortages generally force prices up. However, this is largely dictated by whether production stocks are high due to surpluses and supply outstripping demand in previous years. If stocks are high enough, this may prevent sugar prices from rising despite production shortages.

2) The decisions and actions of farmers
Farmers and growers may decide not to plant as high an acreage in a growing season. This is usually driven by the price they get paid for the sugar beet or sugarcane they produce, by the high risk of disease affecting sugar crops, the price of fertiliser and whether they can use pesticides to protect yields. Farmers can make this decision, and they may have to raise their prices to suppliers to cover their costs. Though farmers do not determine the price of sugar crops as mills, refiners and traders do, any price rises inevitably get passed onto industrial food and beverage manufacturers and their consumers in shops.

3) Geopolitical events
The Russia/Ukraine war has directly contributed to sharp fluctuations in spot sugar prices. In 22/23, fertiliser shortages led to sugar prices increases in Europe. Then this was reversed in 23/24, when the EU facilitated the import of up to 750,000 tonnes of duty-free sugar from Ukraine into the EU’s market until June 2024. Both Ukraine and Russia are producing more sugar from beet than ever before, and Russia is now the world’s largest producer of beet sugar.  
Other geopolitical events, such as attacks on cargo ships in the Red Sea in early 2024, indirectly influence sugar prices through the impact on shipping container costs and ships being redirected around the Cape of Good Hope, increasing journey times by several weeks.

4) Climate change
Climate events are having a negative impact on sugarcane and sugar beet harvests and yields around the world. Due to climate change, growers and farmers are experiencing more extreme weather conditions, such as flooding or drought. In Europe, flooding has reduced sugar beet yields in 2023/24. Sugarcane is a water-intensive crop, but it is grown in tropical parts of the world where drought is reducing yields and pushing up prices. However, it is possible areas previously deemed too cold to grow sugarcane may become warm enough.
At the same time, atmospheric temperatures and carbon dioxide levels are rising. This is increasing the risk from pest/disease when pesticide bans are in force, especially in parts of Europe.

Sugar is a major commodity that is traded globally. Within the global market, regional variations exist, partly due to trade tariffs. Sugar prices are influenced by multiple factors, such as supply and demand and geopolitical and climate events. As sugar is the primary sweetener in food and beverage applications, sugar prices are closely linked to the price of what we buy and consume.

Ragus manufactures pure sugar ingredients for food and beverage producers, expertly sourcing raw sugars to ensure supply for manufacturing and continuity of supply for our customers. To learn more, contact our Customer Services Team. For more sugar news and Ragus updates, keep browsing SUGARTALK and follow Ragus on LinkedIn.