The relentless climb of ISA’s White Sugar Price Index seems to have finally reverse gears, declining nearly 6 percent since mid-November. The reversal coincided with publication of USDA’s semi-annual World Markets and Trade forecast for MY-21/22, and has since maintained its downward spiral.

Interestingly, the USDA report revised its forecast of global sugar production by 2.5 percent – a significant margin for this food commodity, while marginally elevating global consumption forecast. Yet, global prices have diminished since, indicating that world markets expected an even sharper decline.

Of note is the forecast of growth in global consumption, which is now up 2 percent over MY-20/21. This is the highest rate of increase in annual world consumption since MY-12/13. World consumption is now forecast to reach 175 million tons, heralding a turnaround from Covid-led downturn which saw consumption drop to 170 million tons. For context, that’s akin to Pakistan’s annual consumption nearly wiping off the market (national consumption is estimated between 5.5 – 5.9 million tons).

Here it may be worthwhile to recall that despite a crash in nearly all commodity prices during peak pandemic months, world sugar prices managed to hold their ground relatively well. This was partly driven by supply-side factors that preceded Covid-19. World sugar output crashed from peak levels of 194 million tons in MY18 to 166 million tons by MY20, in part an outcome of extreme weather events but mainly driven by record high carryover inventory from preceding years.

Throughout lockdowns, global sugar stocks were slow to recover, holding demand for imports steady, which in turn ensured that sugar prices did not tumble the same way as other food commodities prices did. By the time global trade resumed and supply chain crisis begin to turn trajectory of world commodity indices, global sugar stock position was all set to fly-on all engines, breaching levels not witnessed in over 10 years.

So, will sugar prices continue rising now that global trade has resumed on full throttle? That’s hard to say. Weather has been kind to sugarcane and sugar beet crops in most regions, meaning output may not be as severely affected as was witnessed in the last two years. But that doesn’t mean prices shall fall to levels seen in 2018, simply because stock-to-use ratio is projected in safe vicinity of 96%+, against shock level of under 90% witnessed in MY-17/18.

What does this mean for Pakistan? That the window for allowing export of sugar on world competitive prices may remain open for a little longer. With CIF prices still hovering over $600 per ton – and USDA projecting surplus production of 0.7 million tons - there may be ample room to export at current prices, without involving any subsidies into play.

But global sugar stocks move cyclically, and the next marketing year MY-22/23 may very well see substantial marketable surplus returning to global scene. If that happens, it may be too late to foray into world markets; but it will also be election year. Delay by design or coincidence? You decide!