Sugar prices are set to edge upwards of 8% next year due to a decline in global production, according to Rabobank.
The global sugar market is expected to enter into deficit in the 2014/15 season, putting a hike on prices.
This will mean confectioners will be dealt a double blow in 2014 as cocoa prices are also expected to surge as cocoa production fails to keep up with consumption. See HERE.
Drop in production
Tracey Allen, commodities analyst at Rabobank told ConfectioneryNews that sugar consumption growth was expected to remain fairly constant, but a slight drop in production would be responsible for taking the global market in to deficit in 2014/15.
“The ICE #11 has been trading below the cost of production for over 14 months. This has constrained cane and beet area expansion and is likely to limit the production of sugar in the 2014/15 season, driving a deficit balance.”
Consequently, global sugar prices, which stood at US¢ 16.8 per lb in the third quarter of 2013, are predicted to reach US¢ 18.2 for the same period next year.
Rabobank said prices could have been far higher but for record large ending stocks from previous seasons of 73m metric tons for 2013/14 and the strength of the US dollar.
The financial services firm has yet to put a number on the 2014/15 sugar deficit.
Impact of EU reforms
In the EU, sugar quotas and minimum beet prices are set to be abolished in 2017 following reforms to the Common Agricultural Policy (CAP).
Allen said that the reforms would have little bearing on global sugar prices since the majority of internationally traded sugar came from outside the EU, namely Brazil.
She said that the EU may in the long-term look to export sugar which could impact global prices.