Sugar prices have surged to new record levels in over a decade after the re-emergence of the El Niño weather phenomenon affected crop yield in Thailand, in addition to export restrictions in India, the Financial Times reported.

Dramatic weather changes affected the market in different ways, and while Thailand and India have struggled with the output due to heatwaves, Brazil has produced 10-15% more than two years ago, however, the largest economy in Latin America has struggled with heavy rains – creating a logistical difficulty.

The combination of high demand and low production is the exact formula for increased sugar prices.

“Meanwhile, demand in emerging economies has not stopped. Countries such as Indonesia and Egypt have a sweet tooth, plenty of festivals that revolve around sugary treats and fast-growing populations, say experts at Marex,” the FT report added. “Strong demand in the Middle East and Southeast Asia should mean a supply deficit of 3mn tons of sugar worldwide this year. That gap is not expected to close up before 2025.”

FT explains that despite the recent increase in prices, investors who put money into sugar exchange-traded funds (ETFs) are experiencing outflows. Concerns over market stability resulted in investors cashing out, and not reinvesting despite price bumps in the second half of this year.

According to Fabio Palmeri, an FAO global commodities market researcher, the organization expects a 2% decrease in worldwide sugar production in the 2023–24 season compared to the previous year or a loss of roughly 3.5 million metric tons. Global sugar reserves are at their lowest point since 2009 as a result of rising consumption of sugar for biofuels like ethanol, VOA reports.