Eating halva in the houses of the Faiyum, in southern Egypt, has become a kind of mission impossible in recent months. Not only because of the high price of sugar required by this dessert, similar to our nougat, which speculation has caused to shoot up to 275% in 2023 in Egypt. Also due to the shortage of production, which has led the Government to ration consumption per family by a maximum of two kilos and which has also caused the cessation of activity at the historic Abu Qurqas sugar factory, stopped for the first time in recent years. 155 years.
This is just a concrete example of the consequences of the major crisis that the sugar sector is going through worldwide. Production in the main exporting countries has been affected by poor harvests, climate change, logistical problems and an increase in demand from China, mainly, which has sent prices up to the highest values recorded since 2011. according to the FAO food price index. The organization estimates that the price of sugar rose worldwide by up to 26.7% in 2023 compared to 2022, although there were significant spikes such as the one in October, when prices in Spain increased by 42% over the same period. month of the previous year, according to INE data.
In 2023, a total of 177.3 million tons of sugar were produced worldwide, which meant a decrease of around three million tons compared to 2022. Brazil, with 38 million tons, is the main producer in the world, followed by India (30 million) and the entire European Union (almost 15 million). Precisely in India, in addition to Thailand, is where the climate has wreaked the greatest havoc. The dry weather has drastically reduced the yield of sugar cane, ending a “disastrous” 2023, according to the Indian Sugar Manufacturers Association – an organization made up of producers – with a drop in production of 8%. This has led the Indian Government to stop sugar exports to guarantee supply in the country, and also to limit the production of sugar cane that is diverted for the production of ethanol, another of the major conditions that has contributed to raising the price of this basic food.
For the largest producer, Brazil, the sugar cane harvest has not been the problem. In 2023 it increased its production by between 10% and 15% compared to two years ago, but it has also allocated a greater part to the production of cane ethanol, which grew by around 4.5% in 2023. This is They have added major logistical problems, since getting sugar out of the country has been very difficult during the last months of last year. The torrential rains and the congestion of important ports such as Santos, near São Paulo, have contributed to limiting global supply and raising prices not only of sugar, but also of the entire related industry, such as confectionery or sugar manufacturers. confectionery products. An example is Mondélez, manufacturer of Oreo and Toblerone, a brand that has a turnover of 3.6 million euros and that sells about 40,000 million cookies each year in more than 100 countries and that has already warned of its intention to raise prices due to the increase of sugar and cocoa. Its general director, Dirk Van de Put, in statements to Bloomberg, assured that they had no other way out and hoped that consumers would be able to assume these increases.
Meanwhile, demand in emerging economies has not stopped. Countries such as Indonesia, Egypt, China and all of Southeast Asia have increased their consumption and analysts estimate that this will translate into a supply deficit of 3 million tons of sugar worldwide this year.
Unlike Brazil and India, where sugar cane is grown, in the European Union the star is beets, a product that has also been directly affected by the war in Ukraine. But it is precisely sugar cane, or the lack of it, that has contributed most to the increase in prices, which has also boosted the fortunes of some sought-after producers, such as Brazil's Sao Martinho. Its shares have risen a quarter in the past year. Like its biggest rival, Cosan, a good portion of its sugar goes to ethanol production. In fact, about half of the Brazilian sugar crop is converted into ethanol.
It is not the first time that Brazil diverts part of the sugar cane harvest to ethanol production to influence the price. “The Brazilian government found a clever trick: simply increase the amount of sugar cane destined for ethanol production,” wrote financial guru Jim Rogers in his book The Commodity Boom, following the fall in sugar prices. during the eighties and nineties. The scheme is repeated. “Sugar has an inelastic demand,” comments the president of the Agri-Food Economics Commission of the College of Economists, Francesc Reguant. And he points out: “Small variations in supply cause disproportionate price responses. This feature can be taken advantage of by commercial or speculative financial funds to obtain extraordinary profits. "They take advantage of the expectations of tension between supply and demand to take advantage of favorable market positions." The perfect cherry on top for a sugar-free dessert.
