Current overview of the sugar commodity market
Sugar is an important commodity used in a variety of products. It can be produced from beet or cane, with cane accounting for 80% of global output. The consumption volume of the global sugar market reached approximately 175 million tons in 2020. From 2001 to 2018, worldwide sugar consumption experienced an average annual growth of 2.01%.
The global supply of sugar is dependent on the yearly crop yield, which can be affected by a number of factors. Following a particularly bad yield in 2020 – 2021 due to warmer weather and a ban on neonicotinoids (a special type of insecticide) the production of sugar in the EU in 2021 – 2022 is projected to rise for the first time in four years. Brazil is the largest producer of sugar globally, followed closely by India. The Organisation for Economic Co-operation and Development (OECD) projects Brazil and India to produce 21% and 18% of global sugar by 2030, respectively.
The most important factors influencing demand in the sugar market are population growth, income per capita, sugar price, substitutes, demand for complementary goods, and health concerns. Global average per-capita consumption is expected to increase over the next decade, due to income gains and urbanisation in developing countries, leading to increased purchasing power. The biggest growth geographically is expected to be in Asia. It is expected to represent over half of the global consumption by 2030. The projected global evolution of sugar consumption can be seen below in Figure 1. The graph displays the differences in sugar production from 2018-2022 to 2030 for the specified regions. The individual geographical regions are clour matched for comparison.
Projected change in sugar consumption from 2018 – 2020 to 2030 (Figure 1 – by OECD)
Figure 2 outlines the biggest consumers of sugar. India is on the forefront, followed by the EU, China and the US. The USA consumes the most in terms of per capita consumption, followed by Germany, and the Netherlands.
Worldwide sugar consumption in 2020/2021, by leading country (in million metric tons) (Figure 2)
The impact of the pandemic
The global consumption of sugar declined by – 0.4% during the Covid-19 pandemic. This can be explained by lockdowns and restaurant closures for extended periods.
The research firm Platts Analytics believes that possible further pandemic-related restrictions will not affect the demand of sugar any further, as they believe consumer patterns have already been priced in. Therefore, they have not changed their sugar consumption projections for 2021-2022, despite the possibility of new restrictions being implemented in some countries.
Developing VS Developed countries
Projected growth in sugar production is mainly expected to come from emerging markets in developing countries. In developed countries with more mature markets, consumption is not expected to grow, mainly due to health concerns and the availability of substitutes. Per capita consumption is in fact expected to decline, as numerous countries are actively implementing measures to reduce sugar consumption. This means developed countries will create a gap in the demand of sugar, which is expected to be filled by developing countries.
Projections in consumption and production are based on productivity, consumption behaviour, macro-economic conditions, and policy assumptions. Between 2022 and 2027, the sugar market is projected to grow at a compound annual growth rate (CAGR) of 1%, mainly due to increases in popularity in new markets. This projects the market to reach a volume of 186 million tons by 2026, up around 11 million tons from 2021. The price of raw sugar is projected to increase by 2030, while the price of white sugar is projected to remain somewhat stagnant.
One of the key challenges facing the expansion of the sugar market is its political polarization. High tariff barriers from producers protects international competition. For instance, sugar production in Africa would be cheaper, decreasing the price in the market. However, main sugar producers like Brazil and India heavily subsidize their sugar producers and prevent production moving elsewhere. Political reforms in trade policy may encourage a more efficient market in the future.
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