Sugar prices falling: What does this mean for manufacturers and will it last?

The past two years have witnessed a sharp and seemingly endless rise in sugar prices.

Severe drought and high temperatures impacted both sugar beet and sugar cane production, pushing prices up and forcing food and beverage manufacturers to reformulate or raise product prices.

And increases haven’t only been seen in sugar. The food and beverage industry that has been hit by countless commodity price increases, including cocoa, coffee and olive oil.

But good news is at last on the way.

Sugar prices are falling and, at 109.4 index points, have reached their lowest level since June 2021 (Trading Economics).

Why is the cost of sugar falling?Increased sugar cane yields in Brazil have contributed to healthy supplies globally leading to falling prices. What’s more, the outlook for this year’s supply is also good, with market insights analyst for sugar at Vesper, Gabrielle d’Arco, predicting the 2025/26 crop will reach around 41–42 million tonnes.

Added to that, many Brazilian farmers are pivoting from ethanol to sugar as a more profitable crop, helping to bolster supplies.

Thailand’s output is also projected to recover to around 9–10 million tonnes following improved weather conditions, while India’s 2025/26 production outlook has improved to 32–33 million tonnes on the back of favourable early monsoon developments.

“Combined with strong Brazilian exports, this has eased supply concerns and weighed on prices,” says d’Arco.

By contrast, sugar beet production is widely expected to be down for the 2025 harvest later this year, with vice president of sales & marketing at Tate & Lyle Sugars, Darren Peters reporting that some beet producers estimate up to a 9% drop in planted area.

Increased sugar cane yields in Brazil have contributed to healthy supplies and falling prices. (Image: Getty/Aphirak Thila)Will sugar prices keep falling?The current outlook for sugar production is good, meaning prices will keep dropping, at least in the near future.

“Prices are expected to remain under pressure, having already fallen below 16 cUSD/lb,” says Vesper’s d’Arco. “A global surplus is anticipated, driven by higher production in Centre South Brazil, Thailand, and India.”

The long-term trend is less certain, as climate change continues to threaten the success of all crops, particularly sugar.

“Weather remains the key risk across all regions,” says d’Arco.

She goes on to emphasise that sugar prices are highly volatile. This volatility is driven by predictable seasonal patterns and unpredictable macroeconomic shifts, extreme weather events, and geopolitical developments.

Furthermore, the current drop in price will likely result in increased demand, which could push prices back up. In May 2024, China increased imports after prices briefly dropped to a 1.5-year low, showing how even short-term dips can trigger significant shifts in demand.

Demand for sugar-rich foods, including chocolates, cakes, sweets and biscuits, remains high. (Image: Getty/Paul Bradbury)What does this mean for food and beverage?Food and beverage manufacturers have been fighting an uphill battle against spiraling commodity prices for several years now, so the fall in sugar prices will come as welcome news, particularly in sectors such as bakery, confectionery and soft drinks, which were hit hardest.

However, while the price drop is good news, manufacturers still face additional costs such as import tariffs, environmental compliance costs, and national sugar taxes on finished products, which can limit the direct benefit of lower raw sugar prices. Plus high energy and packaging costs continue to put a strain on budgets.

Moreover, many manufacturers have already reformulated their products to replace sugar with lower-priced sweeteners, to remain profitable.

Having said that, many manufacturers which chose to stick with sugar, have been passing increasing commodity costs onto their customers.

Mondelēz chief executive, Dirk Van de Put, stated in November 2023 that the company planned to enforce a “straightforward price increase” on its products to compensate for the increase in the cost of sugar. And with demand for sweets, chocolates, cakes and biscuits remaining high, the company was confident its decision would not impact sales.

Whether manufacturers, who raised their prices to accommodate rising costs, will lower them again remains to be seen.

However, not all manufacturers decided to pass on rising costs to the customer. Some made alternative plans in order to make increasing production costs more manageable.

“Lindt & Sprüngli has made a concerted effort to compensate for increased costs by increasing efficiency as much as possible and through a forward-looking purchasing strategy,” said a spokesperson for Lindt & Sprüngli.

It’s these manufacturers that are set to benefit from the price drop the most as they’ve worked to improve efficiency in their production.