Signs of 'Sugarflation' from Thailand... Sugar Prices Reach Highest in 12 Years

India Considers Sugar Export Ban
Will It Fuel Global Food Inflation?

Thailand, the world's second-largest sugar exporter, is expected to see its sugar production decrease by about 20% this year due to drought. As concerns over global 'sugarflation' (sugar + inflation) rise, there is growing anticipation that already unstable food prices could be further stimulated.

According to Bloomberg on the 8th, the Thai Sugar Producers Association forecasted that sugar harvest for 2023-2024 will drop by about 18% compared to previous years, reaching 9 million tons. Langsit Hiangrat, chairman of the Sugar Producers Association, said, "Some farmers will give up sugar cultivation and switch to cassava farming," adding, "Drought will cause difficulties in the production of sugarcane, cassava, and rice."

Due to the expected decline in Thailand's sugar production, sugar prices in the global commodity market rose to their highest level in 12 years this week. On the London International Financial Futures Exchange, the October sugar futures price reached $733.3 per ton as of the 7th. This is the highest level in 12 years and 8 months since January 2011. Furthermore, with India, the world's largest sugar producer, reportedly considering banning sugar exports starting next month, sugar prices are likely to rise even further.

Abnormal weather conditions that have affected the world this year have caused unstable trends in food prices, including sugar. According to the European Central Bank (ECB), if El Ni?o (a phenomenon where sea surface temperatures near the equator rise) causes temperatures to increase by 1 degree, global food prices are expected to rise by about 6% over the next year. Additionally, the suspension of Russia's Black Sea grain deal and India's rice export ban have compounded the pressure on food price increases.

If global food prices rebound, concerns are emerging that inflationary pressures will intensify, especially in emerging countries. If central banks raise interest rates to control inflation, the burden on low-income and vulnerable groups is expected to increase further.

Diana Iovanell, Market Economist at Capital Economics, said, "Emerging market central banks are facing a strong El Ni?o," and added, "It is expected that emerging markets will continue prolonged high interest rates to combat persistent inflation."