Sugar continues to have its ups and downs, and investors are hoping to get in on that next “up cycle” especially like the one that occurred between mid 2015 and mid 2016. Sugar prices nearly doubled during that time
There are a lot of factors that can affect the price of sugar, but a big one is supply.
Indian Sugar Supply and Stockpiles
Maharashtra, India’s second-biggest sugar producing region, experienced something new recently for them. The price of cattle feed rose so much that it became more profitable for farmers to sell their sugar cane as cow fodder than to turn it into sweetener. Many farmers sold their sugar cane as cattle feed, leading to a drop in India’s sugar production for the consumer market.
The USDA for example shared a report that showed a 15% decline in India’s production during a 2020 period
Brazil’s Shift to Ethanol
Brazil makes up one third of the world’s sugar exports which means that any fluctuation in their production or export declines in that market will affect global prices. Crude oil prices are higher and these prices have made ethanol more competitive than gasoline for Brazilian drivers.
As ethanol demand booms, so do ethanol prices, making Brazil’s farmers dedicate a bigger share of their sugar crop to the production of the fuel rather than to the sweetener.
Sugar Supply Deficit in the United States
Over half of the sugar produced in the US comes from sugar beets, these are grown mainly in upper Midwest states like Montana, Minnesota, North Dakota, and Colorado. The other half of the country’s sugar comes from sugar cane grown in warmer states like Hawaii, Florida, Louisiana and Texas.
The US beet harvest for 2019-20 was about 10% lower than the previous year. Due to that production deficit, the US had to increase its sugar imports to meet domestic demand, a trend that will continue through 2021.
So What Does This Mean for Sugar Investments?
All signs point to investing in Sugar.
It is likely that sugar will continue to be a good choice for some investors over the next couple of years. A long term strategy is not yet clear for sugar.
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