Why extreme weather is making sugar more expensive around the globe

A worker arranges sugar canes to sell ahead of the Hindu harvest festival of Pongal at a wholesale market in Chennai on Jan. 12, 2022.

People around the globe are seeing sugar prices ticking up as the year draws to a close. An unusual dry spell in India and Thailand, the two largest exporters of sugar in the world behind Brazil, has weakened this season's harvest.

El Niño, a naturally occurring climate pattern characterized by abnormally warm ocean waters in the tropical Pacific, is causing a domino effect around the world, fueling extreme weather in different areas. Abnormally dry weather in parts of Asia has taken its toll on sugar production.

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In the past two months, global sugar prices hit their highest trading values in 12 years, surging past 28 cents per pound, according to data from the International Monetary Fund.

Retail prices for sugar and sweets are predicted to increase by 8.9 percent in 2023 and 5.6 percent in 2024, according to data from the United States Department of Agriculture. The predicted price increases are well over historical averages but lower than the 10.4 percent increase in prices from 2022.

Sugar is the latest example of the ways El Niño and human-caused climate change have intensified weather extremes, which then affects goods people buy in markets - coffee and olive oil have also been affected by prolonged drought around the world this year.

Here's what to know about impact:

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Where in the world are sugar prices most affected?

India exports raw sugar - like brown sugar, and refined sugar - to Bangladesh, Iran, Pakistan, Iraq, Saudi Arabia, Indonesia, Malaysia, Somalia, Sudan and sub-Saharan Africa and other surrounding countries.

For people in developing countries, especially those that rely on sugar to boost their daily calorie intake, the effects of high global sugar prices are devastating, according to Joseph Glauber, a senior researcher at the International Food Policy Research Institute.

"For poorer countries like sub-Saharan Africa, it is an important caloric source. They have pretty low consumption rates but having high prices really can have impacts on nutrition or at least calories in those countries," Glauder said. Many of these countries face hunger and high undernourishment rates.

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Will U.S. sugar consumers be impacted?

The effects of surging prices won't be felt everywhere. Shoppers across the U.S. won't be impacted by high global sugar prices because domestic prices are already way higher than global prices. The U.S. receives sugar imports based on annual quotas and commitments made through the World Trade Organization, Glauder said. The country regulates the quantity of sugar that's imported each year.

"That means that U.S. sugar prices are high. Even though we've seen this big increase in global sugar prices, they're still below what U.S. consumers pay," Glauder said.

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What is the impact El Niño is having?

El Niño weakened the monsoon season and brought dryness across parts of South and Southeast Asia causing major sugar-producing countries to underproduce. Steep prices are a result of a smaller sugar supply and a decline in exports in India.

India experienced lower than normal rainfall during its monsoon season - which spanned from June to September. In June, the country recorded a 60 percent rain deficit across the entire country. For the season overall, the country received about six percent less precipitation than average, according to data from the country's weather agency, the India Meteorological Department of Ministry of Earth Sciences Government of India.

As El Niño increased in intensity during August and September, monsoon rains retreated early, said Jon Davis, the chief meteorologist at Everstream Analytics. Extremely dry conditions took over Maharashtra - one of the biggest producers of sugar in India.

"In that specific area, the dryness which reduce yields, thus reduce production there, and for the country as a whole, then that will certainly have economic ramifications," Davis said.

India's sugar production is projected to fall to 33.7 million metric tons in 2023-2024, an 8 percent decline from previous years, according to Indian Sugar Mills Association (ISMA). India produced an estimated 36.6 million tons during the 2022-2023 season.

Thailand also experienced a 5 percent overall deficit in average precipitation rates this year, according to the Thai Meteorological Department.

Thailand's sugar cane production was severely impacted by drought during a key growth period causing production to take a 15 percent hit compared to last year, according to the U.S. Department of Agriculture. Sugar production dropped from 11 million metric tons in 2022-2023 to 9.4 million metric tons.

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How long will the impact last?

Production shortfalls across the world over the past few years have also contributed to higher prices.

Brazil, the world's largest exporter of sugar, struggled with sugar production last year. Reported port bottlenecks have caused stalled exports out of Brazil this year, who saw a rebound in sugar yield, according to Glauder. But overall global supplies of sugar have been reduced this year.

Glauder believes that Brazil's improved crop yield may help global sugar supplies in the coming months but the impacts of a prolonged El Niño could lead to more issues down the line. But early forecasts predict that there could be a rebound in production in Thailand and India next spring.

"I think the big issue will be duration of the El Niño, and how fast we get back into sort of an into a sort of neutral world," Glauder said.

This year's El Niño is very powerful but not the worst that the world has seen, Davis said. The ramifications of El Niño, and the peak window, will continue for the next five months. And then it will dissipate. The rate of dissipation will give a clue as to the impacts of El Niño for next summer.

"If El Niño lingers, then you would have a possibility of more problems across that area from a dryness standpoint - which was the issue here this year - if it dissipates quickly, then next summer, could potentially have a bit more of a normal situation," Davis said.

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