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Kids and adults alike love it; US health secretary Robert F Kennedy Jr calls it poison. For investors, too, sugar has proved more toxic than sweet: raw sugar prices have broadly drifted lower since a surge in the second half of 2023. But as commodities go, it’s a curious one. Like a toddler who has just demolished a packet of Skittles, this market doesn’t play by the rules.
Decent weather and low oil prices, which discourage Brazilian mills from diverting a bigger share of cane into ethanol, are weighing on the white stuff. In Brazil, cane gets diverted into fermentation for fuel once the price of raw sugar drops below around 15-16 US cents.
Price distortions abound. Governments have meddled in the market ever since the Napoleonic wars, when UK boats blockaded sea routes from the Caribbean to France. Trading dynamics have changed since then: France and the UK are now among 100-plus countries producing sugar. Some 70 per cent of global raw sugar supply comes from Brazil.
Europe curtailed its subsidies-and-dump policies in the mid-noughties, although only jettisoned quotas in 2017. Support continues in the US, where sugar prices are roughly double international levels. India, the biggest consumer and number two producer, limits exports.
The sweet stuff has the appearance of a defensive asset: it takes more than even the US president’s chaotic policies to stunt our taste for sweetmeats. Indeed, research by the Institute for Fiscal Studies, a UK think-tank, found that Britons’ sugar consumption actually increased during the financial crisis.
More broadly, consumption increases along with economic growth and the number of mouths to feed: India, south-east Asia and sub-Saharan Africa are all on the rise. Getting a precise measure on end demand is tricky, given sugar’s propensity to end up anywhere from ketchup to crisps, but CZ Advise estimates British consumption peaked in the 1960s. India, with wealth and population both growing, is the biggest consumer.
Health and science stand to impede future demand. Ultra-processed foods are falling out of favour. GLP-1 weight loss drugs, which suppress appetites, are likely to reduce consumption. The drugs’ short history demands wariness on long-term effects, but safe to say if there is an impact on consumption, it will be widespread. Kennedy would like to see a US where consumption of added sugar is zero, though even he admits this is far fetched.
A survey last year found one in eight American adults had tried GLP-1s. Lower-cost generics, launching as patents expire next year in China, Brazil and India, will increase take-up. But fret not. Governments’ centuries-old addiction to protectionism will surely limit the bitter aftertaste of any future sugary backlash.
louise.lucas@ft.com
