Global food crisis may spread from grain to sugar
Sugar prices are expected to soar due to the export restrictions imposed by a number of key producing nations seeking to tame rising domestic food prices.
The impact of the Covid-19 pandemic, which seriously undermined global supply chains, has been dramatically aggravated by the crisis in Ukraine and the subsequent sanctions imposed on Russia. The conflict between the two major grain exporters has disrupted global supplies.
A number of countries have moved to limit exports of other key commodities, putting global food security under threat, while risking further increases in the prices of agricultural products.
On Monday, Kazakhstan began a six-month ban on white and cane sugar exports. India is reportedly considering placing restrictions on sugar exports for the first time in six years to prevent a surge in domestic prices. India’s ban is expected to target around 10 million tons of this season’s exports.
Last week, Reuters reported that sugar cane mills in Brazil, the world’s biggest producer and exporter of sugar, were canceling sugar export contracts and shifting production to ethanol in an attempt to take advantage of the high energy prices. The estimated cancelations could equate up to 400,000 tons of raw sugar.
Earlier this month, Pakistan imposed a complete ban on sugar exports, citing deep concerns about inflation. In March, Russia banned sugar exports until the end of August.
“For sugar, it’s relatively easy for Brazilian mills to switch production to ethanol production if the economics make sense, and this can push global sugar markets higher,” Darin Friedrichs, founder and market research director at Sitonia Consulting, a Shanghai-based commodities analysis firm, told the South China Morning Post.
“In particular, as both food and energy prices are rising, there is increased focus on the use of food for the production of fuel,” he added.
Earlier this week, the head of the IMF, Kristalina Georgieva, warned that the global economy is facing “its biggest test since the Second World War.” UN Secretary General Antonio Guterres said global hunger levels “are at a new high,” with the number of people facing severe food insecurity doubling in just two years, from 135 million before the pandemic to 276 million today.
However, Dong Xiaoqiang, the commercial head of AB Sugar China, said he does not expect a global shortage of sugar this year despite mounting concerns, adding that India and Thailand, the world’s second largest sugar producer and number two exporter respectively, are expected to increase their sugar output in 2022.
“What’s happened recently is more a show of emotional tension over the supply of food including sugar,” Dong told the media. “Most countries that announced export bans are small sugar producers with a tight balance between supply and demand, and not many contracts have been cancelled in Brazil,” he said, while adding that prices are still expected to surge.
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