Food Prices Rising with Commodity Boom?

After a decade of falling prices, many commodities have strengthened in the past year.

Widespread reports of a “commodity boom” have driven food prices higher as speculators quickly enter commodities.

As it stands, corn and soybean are up 70% year-on-year, and refined sugar prices have increased from 300 USD/mt to 450 USD/mt since Apr’20.

These price hikes have been exacerbated by the global container shortage and high freight costs.

Where’s Been Hit the Hardest?

Developing countries have felt the brunt of this as they tend to spend a high proportion of income on staple foods.
Sugar is a key food source, especially in poorer areas, meaning price increases here can have serious social consequences.
This is concerning as Russian, Ukrainian, Pakistani and Sri Lankan sugar prices have risen dramatically in the last year.

In many cases, imports have been challenging and expensive due to the logistical disruption seen around the world which has made matters worse.
Some governments have also been reluctant to waive large import duties designed to protect the domestic sugar industry.
But it’s not just these countries that have been affected: we’ve heard reports that Ivory Coast’s sugar prices have jumped 52% this year, and prices in Bangladesh have also been on the rise.

You Can Monitor Domestic Sugar Prices in the Interactive Data Section

Back in December, the Government and producers agreed to freeze sugar prices at 36 RUB/kg (496 USD/mt) wholesale and 46 RUB/kg (634 USD/mt) retail.
The Government’s also looking to set up a sugar buffer stock system to stockpile up to 500k tonnes of sugar.
Prices are now under control and the Government’s running a duty-free white sugar import programme between 5^th May and 30^th September to keep it this way (they normally incur a 340 USD/mt duty).
White sugar imports were chosen as they can quickly ease supply shortages.

Ukrainian sugar stocks have been declining for the past two seasons.
Low world and domestic sugar prices left little incentive for farmers to grow beet, meaning its area declined quite significantly.

Ukraine can import up to 260k tonnes of raw sugar each season, incurring just 2% duty.
However, it’s a slow process as there are just two factories capable of refining raw sugar.
Even so, the Government recently rejected a 60k tonne duty-free white sugar import proposal, leaving the 50% duty in place.
It’s instead encouraging producers and consumers to agree on prices ahead of the next crop.

In Pakistan, the mills and traders have been accused of stockpiling to try to take advantage of higher prices.
The Government’s therefore introduced measures to better monitor the mills’ production and sales to prevent hoarding.
Sugar smuggling from Pakistan into Afghanistan has further reduced stocks of sugar within Pakistan.
Earlier in the year, the Government approved a 500k tonne duty-free white sugar import programme, but it’s been very difficult to secure this sugar (several tenders have failed, most likely because the price offered was too high).

Lastly, in Sri Lanka, the Government’s introducing measures to curb rising prices and prevent living costs from climbing too high.
These measures include setting maximum prices and rationing some essential food products.

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