Why are sugar prices so low right now? Summary
- Global sugar surplus of 1.98m tons expected in 2025/26 season
- Low oil prices shifting ethanol mills toward sugar production instead
- EU demand falling as manufacturers switch to sugar alternatives
- Prices may rise gradually within nine to twelve months from now
- Manufacturers should lock in contracts while prices are low
The price of sugar is the lowest it has been for half a decade, driven by a global sugar surplus and the changing use of sugar mills.
When can manufacturers expect them to go up again? And how can they prepare?
Why have sugar prices been so low?
Sugar prices have reached a five-year low. According to Trading Economics, the price of sugar reached $14.28 (€12.40) per pound on October 30, which is lower than sugar has been since October 2020.
EU sugar, however, has not quite reached the lows of global sugar, as it is derived more from beet than cane, explains Jordan Kear-Nash, principal consultant at supply chain consultancy Proxima. It’s also a more insulated market.
The reason behind the global low is in a predicted sugar surplus. Manufacturers are expecting a surplus of 1.98m tons in the 2025/26 season, explains Stephen Butler, CCO and co-founder at ChAI, a firm using AI to forecast commodities price movements for procurement teams. This contrasts heavily with the 5m ton deficit in the preceding season.
Another reason that prices are so low is the comparable drop in oil and corn prices. Sugar mills in Brazil and the US, two of the world’s biggest sugar producers, can produce either sugar cane for food or ethanol for fuel, depending on which is more profitable, explains Butler.
As oil prices are currently relatively low, demand for ethanol is falling. Thus, many mills have been switching out ethanol for sugar.
In the EU specifically, explains Proxima’s Kear-Nash, many manufacturers are looking to use sugar alternatives, such as apple concentrate, in order to make the health claim “no added sugar”, meaning demand from the EU is lower.
Butler also suspects that the popularity of GLP-1 drugs, which suppress appetite and change the ways consumers respond to sweet taste, has also caused a drop in sugar prices by influencing demand.
When will sugar prices go back up?
With sugar at such lows, the price is bound to go back up at some point.
Sugar prices will come back up over the next nine to 12 months, predicts ChAI. But only gradually. The market is “still significantly bearish”, Butler explains.
The sugar market is currently heavily skewed in favour of short sugar contracts. When a market is skewed one way in any particular direction, Butler explains, price reversals can occur and force traders to reduce risk or profit from these positions by buying back sugar contracts.
Beyond this, factors on the ground, such as weather patterns, could affect crops significantly. They will remain closely watched.
“Everyone is very bearish at the moment, but if some dryer, wetter or otherwise adverse weather appeared during harvesting, that could change the situation quite quickly.”
Furthermore, the trade situation between the US and China could also impact prices, Butler points out, as a trade deal between the two countries could increase Chinese domestic demand for sugar.
While things are looking positive, it is the perfect time for companies which extensively use sugar to insulate themselves from potential shocks in the future.
Companies should lock in longer contracts, suggests Kear-Nash. While the price is low, such deals would be beneficial to manufacturers, saving them the cost of potential price spikes.
