After the problem of grain and energy prices comes the problem of sugar prices, notes Daniel Kostecki, market analyst at CMCMarkets_PL. The expert notes that the price of sugar contracts on the international market has increased by more than 30%. over the past five months. A new term was born - sugarflation.
- There was a problem of cereals, a problem of energy prices, and now for the food industry, a problem of sugar prices - Daniel Kostecki, a market analyst at CMCMarkets_PL, wrote about this on Twitter.
Sugar prices have risen. Sugarflation is born
The expert notes that in 2019, a kilogram of sugar cost an average of less than PLN 3, and now it costs more than PLN 6.
Kostecki notes that the price of sugar futures on the international market fluctuates around $700 per ton, which means an increase of more than 30 percent. since the beginning of the year and the highest level since December 2011. In turn, sugar contracts have jumped about 150 percent since the August 2019 low. Hence a new term was born: sugarflation.
The analyst points out that unusually high temperatures and heavy rainfall in the main sugar-producing regions, such as Brazil and India, are the reasons for this surge in sugar prices. A significant drop in production prompted countries such as India to impose export quotas on sugar.
Will food prices rise? Not right away
According to the expert, the increase in retail prices for sugar will put pressure on the overall inflation forecast, as it will directly hit the food industry. Especially the confectionery industry because it needs a lot of sugar. If the situation drags on, small business owners will consider whether to raise the price of the product or not. However, this will not happen overnight. Kostecki cites the views of people from the industry, according to which the high price of sugar does not immediately affect the cost of processed foods due to long-term contracts. However, when available stocks run out and the previous contract ends, problems will arise that will result in higher prices.
According to Kostecki, the reduction in sugar production due to abnormal weather conditions is not a one-time phenomenon. A rapidly changing climate could turn this issue into a perennial one, raising the important issue of food security.
Source: Wprost
I am George Brown, author at Daily News Hack. I mostly cover economy news and I have been doing this for quite some time now. I have a lot of experience in this field and I’m always looking for new opportunities to learn more.
