For everyone involved in the sugar business, 2018 has, to date, proved anything but sweet.
A glut in the market, combined with political hostility in the west, have sent the sugar price into something like free-fall.
Yesterday, sugar closed down 0.13 cents a pound at 11.84 cents and is trading below 12 cents for the first time since September 2015. It is hard to find a commodities price forecast that can see much relief in the short term.
For investors, this is bad news for a number of companies with exposure to sugar, including Associated British Foods (ABF), Bunge, the trader of agricultural products, and Suedzucker, the German sugar company.
ABF reported earlier this year that, in the 24 weeks to March 3, operating profits at its sugar unit were down 27 per cent on the same period in 2016-2017, at £90 million against £123 million.
The immediate cause for the price slide in the commodity marketis an excess of sugar production. India, the second-largest producer after Brazil, is expected during the current season to harvest 31 million tonnes of sugar, a record, compared with the expected 25 million tonnes.
Output on this scale is something like six million tonnes above domestic demand, and the Indian government is forcefully encouraging the industry to export the surplus. Given prices are lower outside India, ministers are expected to offer export subsidies to farmers.
This, in turn, is likely to drive world prices lower, especially as nearby Thailand – the world’s fifth-biggest producer – has also seen strong output, much of which it is keen to export.
According to the International Sugar Organisation (ISO), representing 87 countries, both producers and consumers, ten countries are the key players in global raw sugar exports, with Brazil, Thailand, Australia, Guatemala, Mexico, India, Cuba, Swaziland, Argentina and El Salvador accounting for 92 per cent of the trade in 2016.
In the longer term, the sugar industry is increasingly up against political and regulatory opposition. This month, the sugar tax UKwas introduced on soft drinks, with an 18p levy on those containing between five and eight grams per litre and 24p for drinks with added sugar of eight grams or more.
The hope is that the tax will give food manufacturers an incentive to reformulate their drinks using less or no sugar, which would be more bad news for sugar producers.
Mexico had already imposed a sugar tax and Michael Bloomberg, when Mayor of New York, banned super-sized sugary drinks. However, a legal challenge saw the ban overturned as having wrongly infringed the liberty of New York consumers.
Camilla Cavendish, former adviser to the Prime Minister David Cameron and proponent of the tax, said: “I believe we need to start treating sugar like nicotine. That means putting a health warning on the packet, not complex labels in small print that few of us can make sense of when we’re rushing down a supermarket aisle.”