The sharp rise in wholesale sugar prices leaves Ishaq Abdulrahim in the lurch.
An increase in the price of bread would mean a decrease in sales, so the Nigerian baker decided to cut his production in half.
For dozens of other bread producers trying to stay afloat, the stratospheric sugar prices proved to be the last straw and they closed for good, writes Euronews.
Sugar is needed to make bread, which is a staple for Nigeria’s population of 210 million. For many people struggling to make ends meet, it is a cheap source of calories. The sharp rise in prices – by 55% in two months – means fewer bakers and less bread.
“The situation is very serious,” says Abdulrahim.
The struggle of Nigerian bakers is a microcosm of the effects of rising food and fuel costs and the outsized impact of high sugar prices. In many bakeries, sugar is used both to sweeten pastries and to feed the yeast that makes bread rise.
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Bread is often the only food that poor households can afford. When bakers raise bread prices, as they did by 15% earlier this year, some people go hungry.
Not being able to absorb the higher costs is not an option, says Mansur Umar, chairman of the Nigerian Bakers Association. “You can’t buy at high prices and sell at low prices,” he adds.
A blow to developing countries
Global sugar is trading at its highest price since 2011, mainly due to lower supplies after unusually dry weather damaged crops in India and Thailand, the world’s second- and third-biggest exporters.
It is another blow to developing countries already dealing with shortages of staples such as rice and food trade bans that have fueled inflation.
All this contributes to food insecurity due to the combined impact of the natural climate phenomenon El Niño, the war in Ukraine and weaker currencies. Richer Western countries can absorb the higher costs, but poorer countries are struggling.
Global sugar stocks hit a 14-year low
The UN’s Food and Agriculture Organization forecasts a 2% drop in global sugar production in the 2023-24 season compared to the previous year, meaning a loss of about 3.5 million tonnes, said Fabio Palmeri, a global commodity market researcher of FAO.
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This is partly due to El Niño, a natural phenomenon that changes global climate patterns and can cause extreme weather conditions, from drought to floods.
Also, more sugar is being used for biofuels such as ethanol, so global sugar stocks are the lowest since 2009.
Brazil is the largest exporter of sugar, but its crop will only help fill the gap until 2024. Until then, import-dependent countries – like most of those in sub-Saharan Africa – remain vulnerable.
Nigeria, for example, buys 98% of its raw sugar from other countries. In 2021, it banned the import of refined sugar, which conflicts with a plan to build domestic sugar processing, and announced a €67 million project to expand sugar infrastructure. But these are longer-term strategies.
Abuja traders like Abba Usman are facing problems now. The same 50-kilogram bag of sugar that Usman bought a week ago for 60 euros is now worth 74.
As prices rise, his customers decline.
“The price is increasing every day, and we don’t know why,” says Usman.
The sweet business is becoming increasingly bitter because of sugar pricesThere are many factors behind the rise in prices, from climate change to the war in Ukraine
How El Niño Affects Crops
India experienced its driest August in more than a century, and crops in the western state of Maharashtra, which accounts for more than a third of sugarcane production, lagged in a crucial growth phase.
According to the Indian Sugar Manufacturers Association, production in India is likely to decline by 8% this year. The world’s most populous country is also the largest consumer of sugar and currently restricts exports.
In Thailand, the impact of El Niño at the beginning of the growing season changed not only the quantity but also the quality of the crop, says Narajip Anantasuk, head of the Thailand Sugar Growers Association.
It expects only 76 million tonnes of sugar cane to be milled in the 2024 crop season, compared with 93 million tonnes this year.
A report by the US Department of Agriculture predicted a 15 percent drop in production in Thailand in October.
Price controls can limit production
Thailand reversed a sugar price hike within days, imposing price controls for the first time since 2018.
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According to Anantasuk, this will discourage farmers from growing sugar by limiting their income. “It’s like preventing the industry from growing, preventing open competition,” he says.
Wholesale prices were allowed to rise to help farmers cope with higher costs – in part because of government requirements not to burn their fields, making harvesting cheaper but enveloping much of Thailand in heavy smog.
Looking ahead, Brazil’s crop is expected to be 20 percent larger than last year’s, said Kelly Goffari, senior analyst at agricultural data and analytics company Gro Intelligence.
But since the country is located in the southern hemisphere, the increase in global supply will not occur until March. This is due to favorable weather conditions in Brazil at the beginning of this year, as well as an increase in the area planted to sugar cane, according to the USDA.
According to FAO’s Palmeri, the biggest concerns are in the coming months. Population growth and increased sugar consumption will further strain reserves, he adds.
Sugar supplies last less than 68 days
According to the US Department of Agriculture, the world currently has less than 68 days of sugar supplies to meet its needs, compared with 106 days when supplies began to decline in 2020.
“This is the lowest level since 2010,” said Joseph Glauber, a senior fellow at the International Food Policy Research Institute.
Global rice prices hit a 12-year high and continue to riseIndia, the world’s leading rice exporter, banned exports of non-basmati white rice on July 20
Indonesia – the biggest importer of sugar last year, according to the USDA – has cut imports and China, the number two importer, has been forced to release sugar from its stockpiles to offset high domestic prices for the first time in 6 years , says Palmeri.
For some countries, importing more expensive sugar takes away foreign currency reserves such as dollars and euros, which are needed to pay for oil and other important goods, explains El Mamoun Amrouk, an economist at the FAO.
An example of this is Kenya. Once self-sufficient in sugar production, it now imports 200,000 tonnes a year from a regional trade bloc.
In 2021, the government restricted imports to protect local producers from foreign competition, but reversed this decision as the harvest declined due to insufficient rains and poor management.
The amount of sugar milled in Kenya fell steadily from June to August. To compensate, monthly imports doubled from September to October. Meanwhile, a 50-kilogram bag of local sugar doubled in price – up to 55 euros, Euronews adds.
