High oil prices have been causing rises in not only fuel and material costs but also in one thing consumers are more familiar with — sugar.
Sugar prices in Japan have soared more than 20 percent over the last three years because of higher demand for sugar cane to produce bio-ethanol, a gasoline alternative. This has cut the supply of sugar cane available for sugar production, which could push prices even higher.
“Sugar has become a speculative commodity,” said Shizuo Shoji, head of the crude sugar division at trading house Mitsui & Co. “Sugar’s image that it’s cheap and can be easily obtained whenever we want is vanishing.”
Sugar is a leading product on the major commodity futures markets, along with crude oil and corn. Its daily trading volume tops gold and coffee.
Traders said futures trading has been causing prices to spike, with the futures price of sugar briefly rising to over 20 cents per pound, or 0.45 kg, in February, compared with about 12 cents last September.
Ups and downs in the global sugar markets directly affect prices in Japan, which imports 60 percent of its supply.
Wholesale sugar prices in Japan rose to about 160 yen per kg in May from 130 yen in 2003.
Mitsui Sugar Co., Japan’s top sugar refiner, has raised wholesale prices three times since October.
“It is evident that fewer supermarkets sell sugar at discount prices in Tokyo,” one of its officials said.
Brazil, the world’s largest sugar cane producer and thus the biggest ethanol maker, has a strong influence on the global sugar market, traders said.
The global price trend largely depends on whether the country allocates more sugar cane to production of sugar or ethanol, they said. Recently, Brazil spent more than 50 percent of its sugar cane on ethanol production.
Expecting rising demand for ethanol in Japan and other parts of Asia, the Brazilian government is improving its facilities for ethanol production and exports — a move widely seen as heralding a slowdown in sugar production.
High sugar prices have also had a negative impact on emerging economies like China, where economic growth has sharply increased sugar consumption in recent years. China is now seen shifting to alternative products, including watermelon sugar, which is cheaper and of lower quality.
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