Peak Sugar?


What was the best performing commodity last year? Oil got wiped out. Coal was hurt. But sugar prices held up very well, at least until November. Now sugar prices are soaring again.

FT Alphaville quotes a report from Dresdner on the rise of sugar. It seems that sugar crops are shrinking while demand remains strong.

From FT:

Sugar prices are close again to the 4-month high recorded at the start of February, at 13.37 US cents a pound. Numerous market observers have revised their forecasts of an expected deficit on the sugar market this year downwards, some quite significantly. Sugar broker Czarnikow or the consultancy Kingsman expect a market deficit of more than 10 million tons. This week, India, the world’s second largest sugar producer, lowered its forecast for sugar production in this crop year (October to September) by 1.5 million to 16.5 million tons. This would mean a fall in production of about 10 million tons in comparison to last year. As India is also the world’s largest sugar consumer, this has huge implications on the market balance.

There’s some controversy, apparently, about how deep the sugar deficit might be. Brazil is ramping up production. FT Alphaville goes on to wonder if sugar stored in candy form counts as an investment.

We actually may have an answer to that question. You see, sugar stored in candy may be a good investment if it’s in the right kind of candy. Sugar in chewing gum may be a toxic asset. But chocolate is booming.

From Reuters:

Chocolate eating is on the rise in the current economic slowdown, while chewing gum is suffering, according to British confectionery giant Cadbury

Chief Executive Todd Stitzer said consumers were tucking into more chocolate at home in the recession, while chewing gum, which tends to sell in convenience stores, petrol stations and airport shops, had been hit as people travelled less.


“Chocolate benefits as people stay at home, but gum has suffered. Chocolate sales are holding up well as people buy multi-packs, stock up the larder, and stay at home,” he said after a 2008 results news conference.