Sugar May Soon Become More Expensive. Here's Why

As inflation continues to ratchet up the cost of food and fuel around the world, people may now need to brace for yet another price hike, this time on a key ingredient in all our favorite sweets: sugar. According to Reuters, India's government recently announced plans to limit sugar exports in order to keep prices in the country low.

This could mean bad news for the rest of the world, as World Population Review reports India is the second-largest producer of sugar globally behind Brazil, producing an estimated 26.6 million tons of sugar each year. India's move to limit sugar exports may start impacting world markets quickly, as the cap is being imposed for the current harvest season, which restarts in October. The Straits Times reports that once producers export 9 million tons of sugar, they will have to seek permission from the government to export the final million. Exporters have already promised 8.5 million tons to foreign markets, 7.1 million of which already shipped between October 1, 2021 and April 30, 2022, with an additional million expected to be exported by the end of May.

The cost of war

The news that India may soon cut off their supply of sugar from the rest of the world is the second shock to come out of the country this month. According to Quartz, the nation announced May 13 it would be banning wheat exports due to crop damages from a hotter-than-predicted growing season. This was a particularly concerning decision for many, as the country had previously promised assistance to those who usually depend on Russia or Ukraine for the staple crop.

Russia's invasion of Ukraine in February has created a major disruption in the wheat and grains market. According to CNBC, the two nations are responsible for 29% of the world's wheat production, most of which has been cut off by sanctions or logistical issues created by the war. This disruption has created wheat shortages in countries dependent on importing the grain from Russia and Ukraine and has driven up prices globally as demand grows.

The conflict in Ukraine has driven up costs around the world, not just for wheat but also corn, sunflower oil (which is used to make livestock feed), fertilizer, and oil, which according to World's Top Exports is Russia's top export.

Competing with big oil

Skyrocketing energy costs created by the embargo of Russian oil and gas are also contributing to the impending sugar shortage. While India is being cautious about rationing its own abundant supply (per The Straits Times), Brazil is planning on using much of its sugar crop for other purposes, namely creating ethanol fuel. According to Reuters, some Brazilian sugar mills are canceling export orders for refined sugar and are instead shifting their production more heavily to ethanol in order to take advantage of — and curb — rising energy costs.

While Reuters notes that most Brazilian sugar mills are capable of shifting production back and forth from ethanol to sugar rather easily, more and more mills are opting to focus heavily on ethanol this year, with the market price of the biofuel making up for fines the companies may have to pay for canceling sugar export orders.

With India reluctant to sell its sugar and Brazil focused on fuel rather than foreign markets' sweets consumption, more of the world may be facing scenes like the one that NBC Boston reports befell some New England ice cream parlors last weekend when a sugar shipment delay halted production at a regional manufacturer during an early summer heatwave, causing some shops to grow concerned about their future supply.