World sugar prices have almost halved in two years but UK food manufacturers report only modest price declines because of continuing EU trading restrictions.
Traded in New York, sugar prices have slumped from €505/t in summer 2011 to just €280/t today. Good harvests in Brazil and other sugar-producing countries like Thailand have created a global glut that has sent prices tumbling.
But the prices UK manufacturers and consumers have to pay have remained stubbornly high. One supplier said UK prices have fallen from a high of €790/t to €730/t, ie 7.6%, while another said the drop was “low tens of euros”. “There has been movement, but for most buyers the gains have been wiped out by negative currency effects,” the first supplier added.
Commodity prices 8 June 2013: cocoa butter, coconut oil, tea
There’s no getting away from cocoa butter in our list of key commodities risers, with prices up 114.9% year-on-year and counting. Over the past month, prices have moved up by 16.6% to £3,442/tonne as the market continues to reset to more normal pricing levels following unusually low prices in 2012.
Despite a small upwards blip over the past month, coconut oil is much cheaper than a year ago, as falling prices for palm kernel oil have encouraged producers to switch away from coconut oil, curbing demand and depressing prices.
Sri Lankan tea prices remain higher year-on-year, driven up by tighter availability and higher demand for tea in major producing countries, but prices have started to ease thanks to improved production.
Consumers have also failed to benefit, with the average retail cost of 1kg bags of Silver Spoon and Tate & Lyle actually rising 6% to £1.48 [BrandView.com] over the two years since the commodity started falling in price.
Tough EU import restrictions on sugar imports from abroad have kept prices artificially high. EU buyers only have tariff-free access to sugar from a small group of less developed countries that have failed to produce enough for the market.
The EU rules are designed to protect Europe’s sugar beet farmers, who have historically struggled to compete with cheaper imports of sugar cane from the tropics. But today they are creaming in record profits thanks to good harvests and high prices. In December, Associated British Foods reported a 62% increase in full-year operating profits from its sugar beet business to £510m.
Meanwhile, sugar cane refiners have struggled. Tate & Lyle Sugars has had to close its Silverton refinery on the Thames three days a week because it is unable to buy enough sugar.