The price of sugar is up nearly 10 US cents a pound so far in October, with experts predicting a more than six-million-tonne deficit to open up in the market in 2016.
Since peaking at almost US 30 cents a pound (c/lb) in January 2011, the price of sugar plummeted to an almost ten-year low of roughly 10.7c/lb in August this year.
But a rebound in September to roughly 12.5c/lb has continued in October, with the International Sugar Organization quoting 14.07c/lb as the daily price on October 19. The ISO’s 15-day average has climbed from 12.0c/lb to 13.6c/lb in that same time frame.
Five years of surplus in the sugar sector has driven prices down. But according to reports, the ISO is predicting that, starting this season, demand will begin to outstrip demand, and by next year the deficit will double to more than 6mt.
That would suggest the price will continue further in a positive direction.
It could be especially good news for Australian growers, who earlier this month were one of the big winners of the signing of the Trans-Pacific Partnership free trade deal.
The TPP, a trade agreement between 12 economies adjoining the Pacific ocean, is set to remove 98% of tariffs on Australian exports to the United States, Canada, Japan, Mexico, Peru, Malaysia, Vietnam, Brunei, Chile, Singapore and New Zealand.
The deal will allow Australian sugar exporters to ship an additional 65,000 tonnes of sugar a year to the US, boosting total average annual sugar exports from Australia to the US by a third to over 207,000 tonnes.
“Overall, this agreement is a net positive result for the Australian sugar industry,” Australian Sugar Milling Council boss Dominic Nolan told Dow Jones.