January 19, 2010

If you think your mid-afternoon sugar boost is getting more expensive, you’re probably right. Sugar costs have been rising for a while and are getting to levels not seen an almost 30 years. Needless to say, this affects products like candy immediately and directly. Confectionary prices are up almost 10% over this time last year. Raw sugar on world markets is up by 42% over January 2009, and almost double the level in 2008.

There are many contributing factors that are all working together to push the needle. There have been poor cane crops in Brazil and India. Domestic sugar beet production also suffered due to the cool, wet summer. To make matters worse, sugar beet acreage was down as farmers hoped to make more money planting corn.

The situation in Brazil is particularly interesting since much of the sugar crop is being diverted to fuel-ethanol production, so there is an element of food vs. fuel to the equation.

Resource and commodity pricing problems are going to become more common as the world economy recovers. I suppose we should be gratified to see such signs, even though they may be painful for a time.