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Today’s Pickup: Sugar commodity futures are at the lowest in nearly three years as demand decreases

 (Photo: Pexels)
(Photo: Pexels)

Good day,

Commodity prices have generally been rising this year, except probably sugar which has been tumulting down to nearly breach its three-year low. One of the primary reasons for the fall is basic supply and demand economics – global sugar production is at a record high, while the demand for sugar is falling across all levels in the food industry. 

The fall in demand could be attributed to the increased consciousness of consumers about the ill-effects of excessive sugar consumption. In the U.S., artificial sweeteners are an ubiquitous presence across food supplies – it is present in soda, classic Cola, low-fat yoghurt, chocolates, granola bars, and even in ketchup. Added sugars contribute to 17% of the calorie intake of an adult in the U.S. and 14% of that of children. 

As supply and demand face a disconnect, it shows on the tanking commodity futures value of sugar. The raw sugar futures have fallen by 30.5% this year on the ICE Futures U.S. exchange, making it the worst performing commodity of the year. But the world prices would not reflect in the actual sugar prices in U.S. markets, as the country has trade protection on the commodity since 1789 when the Congress enacted the first tariff against foreign-produced sugar. For instance, in 2013, American consumers paid 6 cents more per pound than average world price, ending up spending an unnecessary $1.4 billion more for sugar. 

Did you know?

India is investing heavily in solar energy production, now holding five of the nine largest solar power installations in the world. Nonetheless, the U.S. and China are the table-toppers with them jointly accounting for two-thirds the global solar energy production. 


“I’m certain that currently [the Trump administration] doesn’t know itself what its end game is. There are a lot of Republicans who want to see free trade take place. Obviously we want trade to be fair, and yes, there are some anomalies with China that need to be resolved. But [the Trump administration] really has gone about this in a ready-fire-aim kind of approach; they’re getting themselves deeper and deeper and deeper into it and these countries are understandably retaliating against what they’re doing.” 

– Senator Bob Corker, on the U.S.-China tariffs trade war

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Final Thoughts:

Oil prices have been very volatile over the last few months, courtesy factors like the Venezuela crisis, the Saudi-Yemen war, the isolation of Iran, issues with pipelines in the fracking Permian basin, and even the trade war between U.S. and China. But the supply has somehow managed to remain close to demand, as Saudi Arabia and Russia have increased production to meet the reducing oil output from Venezuela and Iran. 

But now, it has come to a stage where the world is running with a 2 million bpd shortage, which is a little too much for the Saudis to keep up with. Analysts believe that Saudi could increase their production by a maximum of 1 million bpd, but even that would put considerable strain on their infrastructure. The demand would only keep increasing, as it is estimated that global demand would be up by 1.6 million bpd in the next year. This would inevitably lead to an oil squeeze and tip the scales towards a rise in price.