Looming El Nino threatens sugar’s much-needed supply boost
The rising threat of an El Nino weather phenomenon risks derailing an expected boost to global sugar supplies and keeping prices high.
The occurrence often brings drier-than-usual conditions in parts of Asia and Australia and soggy weather in Brazil, historically hurting output in key sugar areas. While the pattern isn’t yet a certainty, the odds of one taking hold later this year have increased.
That could limit the potential for a recovery in production that is forecast to drive the world market into a surplus in the coming season, speakers from the industry warned at a conference in Geneva this week.
The prospect of a looming El Nino comes at a bad time for the market, with sugar surging to the highest in a decade on the back of tight global supplies. That’s threatening to add to costs for manufacturers of everything from soft drinks to baked goods and maintain pressure on global food inflation.
S&P Global Commodity Insights predicts a sugar surplus of 4.5 million tons in the 2023-24 season — which would follow three years of a market either in shortfall or balanced. But that outlook hinges on normal weather, and any upsets could keep sugar prices high.
El Nino is “for sure something to be monitoring going forward,” Luciana Silveira Soncin, global manager of sugar analytics at S&P Global, said at the Geneva Sugar and Biofuels Conference. “With El Nino and risks of disruption to production, there’s more downside” risk to next season’s surplus estimate than upside, she said.
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