The sugar crisis deepened on Thursday after Indonesia, one of the world’s leading importers, failed to buy a single pound of the sweetener in its latest tender.
The setback sent the price of white sugar in London to an all-time high of $760 a tonne. The cost of raw sugar in New York hit a fresh 29-year high of 29.82 cents a pound. Sugar prices have surged 150 per cent since January 2009.
Leading importers in south-east Asia, the Middle East and west Africa are running out of sugar inventories, traders and brokers said, prompting fresh tenders to replenish stocks. Pakistan will tender next month and others are expected to follow.
“If they don’t buy soon, the next stop is an empty shelf,” said Peter de Klerk at London-based sugar merchant Czarnikow.
Shortages are already emerging in some Asian countries, according to local reports. Among the main importers, only Egypt appears to have covered its needs.
Although sugar is no longer a key food commodity in developed countries, it is still a crucial source of calories in emerging countries, making its price a political issue.
Jonathan Kingsman, of Lausanne-based consultancy Kingsman, said that domestic white sugar prices in some importing countries had reached $1,000 a tonne, well above the equivalent international benchmark of about $760 a tonne, a sign of tight supplies. “Countries are running out of sugar stocks,” he said.
The scarcity is such that the European Commission is considering whether it can legally export more sugar under World Trade Organisation rules. “We are in an exceptional situation in the world market,” said an official in Brussels.
Europe’s sugar exports are capped at about 1.37m tonnes after an agreement in 2004 when Brazil, Australia and Thailand – all big exporters – filed a legal complaint. An announcement by the European Commission is due on Tuesday.
Sugar traders doubted Brussels would go ahead with further sales, but acknowledged that European beet farmers had enough surpluses to export an additional 600,000-800,000 tonnes this year.
The sugar crisis has been caused by a large supply deficit due to disappointing crops in Brazil and India, the world’s top producers, due to bad weather. Meanwhile, sugar demand has continued to grow.
In India, the world’s largest consumer, a dry monsoon due to the El Niño weather phenomenon has damaged the cane crop. Sugar production has dropped to around 15m tonnes in 2009-10, down more than 40 per cent from a normal year.
Meanwhile, El Niño brought rains to the dry season in Brazil, which accounts for 60 per cent of world exports. The wet weather has cut the number of days that farmers can cut cane and also reduced the amount of sucrose that refiners can extract, resulting in lower production.
Other producers, including Mexico, China, Russia and several central American countries have also harvested a lower than expected crop.