Sharp Decline in Sugar Prices in Commodity Markets: Reasons and Effects

Fluctuations in the Commodity Market

Recently, the commodity market has shown a volatile trend in agricultural products, while there has been a significant drop in sugar prices. The international price of sugar per pound has declined to $0.1421, reaching its lowest level since December 2020. Since the end of 2024, there has been a decrease of over 25% in sugar prices.

Production Forecasts and Demand Dynamics

Strong production forecasts in Brazil, Thailand, and India play a decisive role in the decrease in sugar prices. The changes in Brazil's biofuel market are related to the increase in corn ethanol production. The cost of corn-based ethanol is lower than that of sugarcane ethanol, leading factories to direct more sugarcane towards ethanol production. This situation increases sugar supply and creates downward pressure on prices.

Global Sugar Surplus Expectations

The Brazil-based consultancy firm Datagro anticipates a global sugar surplus of 1.98 million tons for the upcoming season. Additionally, the increasing demand for weight-loss drugs has contributed to a reduction in sugar appetite, further driving down prices.

The Relationship Between Oil and Sugar Prices

Futures and commodity market expert Zafer Ergezen identifies two main reasons for the decline in sugar prices. One of these reasons is oil prices, and the other is developments in East Asian countries. Ergezen states, "Sugarcane is also used for ethanol production, and ethanol prices are dependent on oil prices. Therefore, as oil prices decline, sugar demand also decreases."

The Effect of Climate Conditions

Recently, increased rainfall in Brazil and East Asia has created expectations for a general increase in sugar supply. Ergezen regards this expectation for increased supply as a factor exerting pressure on sugar prices. "The rains that have fallen in recent months have alleviated supply concerns," he adds.

Dynamics of the World Sugar Market

With approximately 40 million tons, Brazil is the world's largest sugar producer. India, with its high domestic consumption despite low exports, also draws attention. Other countries such as Thailand and China influence market dynamics as well. The impact of the European Union cannot be ignored either.