Prices of raw sugar and cocoa have reached 10-year and seven-year highs in April 2023, according to The Smart Cube, due to low supply and rising demand for both commodities.
Looking at future sugar pricing, the commodities output is projected to drop in key producing countries such as India, Thailand and China. Output in India, the second-largest sugar producer is likely to fall by 5% year-over-year (YOY) in 2022/23. In China, the top sugar consumer, its output is estimated to drop 6.3% YOY.
According to the International Cocoa Organisation, the cocoa market is expected to witness a supply deficit as global cocoa stocks are forecast to fall 3.5% YOY in 2022/23.
“Sugar output has largely been impacted by variable weather conditions. In India, the likely fall in sugar production for the marketing year 2022/23 can be attributed to lower yields, as the key producing states were affected by unseasonal rain. In turn, this saw lower cane availability, causing early closure of sugar mills in the country,” explained Nidhi Jain, Associate Specialist at The Smart Cube. “Meanwhile, sugar output in China is estimated to drop due to dry weather in the key sugarcane-producing province of Guangxi. Although Brazil is expected to witness a bumper crop this year – up 15 per cent YOY – ongoing logistical bottlenecks and supply chain issues are restricting sugar shipments from the country. Furthermore, rains have delayed sugarcane crushing in the country.
“Looking at cocoa prices, these are projected to witness a fall owing to hot and dry weather in cocoa-producing countries, such as Ivory Coast. Cocoa bean arrival from farms to Ivory Coast ports fell 4.6 per cent YOY from 1st October to 16th April. Additionally, crop quality in West Africa may be jeopardised due to a lack of fertiliser and pesticides availability as continued sanctions on Russia – the largest fertilisers exporter – has limited exports.”
According to Nidhi, prices will also be driven up by the cost of energy, particularly when it comes to sugar.
“As sugar and cocoa form key ingredients for most confectionery items, price increases for these ingredients are anticipated to affect input costs of confectionery products, increasing the cost for consumers. For instance, sugar accounts for around 7 per cent of the total raw material cost in a chocolate muffin, while cocoa’s cost share will be approximately 20 per cent,” Nidhi added.
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