Swiss consumers do not benefit from falling sugar prices
Published: Monday, Sep 23rd 2024, 10:10
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The global sugar market is currently under pressure. While the price of sugar is also falling in the retail trade in Germany, consumers in Switzerland are hardly benefiting at all.
A pound of sugar currently costs around 20 US cents on the global markets, down from up to 25 cents at the start of the year. At the low point a few weeks ago, the price of sugar even slipped to just over 17 cents at times, its lowest level since October 2022.
There is a simple explanation for the current slump in the global market price of sugar: on the one hand, lower energy costs are easing production costs, while on the other, record harvests are emerging in key sugar-growing countries. "Lower energy prices are making an important input factor in sugar production cheaper," explains Santosh Brivio, economist at Migros Bank, in an interview with the news agency AWP.
Good harvest prospects
The good harvest prospects in countries such as Brazil, Thailand and India are also contributing to falling sugar prices. "Major sugar producers are expecting a good harvest or even a record harvest," says the Migros Bank economist.
Finally, there is also euphoria about the harvest prospects in the USA. According to the latest report from the US Department of Agriculture, the sugar content of beet harvests in the US Midwest is above average (16% instead of the usual 14%).
Carsten Fritsche from Commerzbank expressed a similar view in a recent commentary. "At 698.8 million tons, the sugar cane harvest in Brazil this year is likely to be around 4 million tons higher than previously expected".
However, he also qualifies this: This will not necessarily be reflected in a corresponding increase in sugar production. This is because it is also very attractive for sugar factories to produce ethanol.
German consumers benefit ...
Despite this one limiting factor, consumers in many countries are currently also benefiting from falling sugar prices. In Germany, for example, they can look forward to a real drop in prices.
According to a report by the news agency DPA, German discounters such as Aldi Nord and Aldi Süd as well as supermarket chains such as Edeka and Netto have reduced the price of a kilogram of sugar from their own brands from 1.49 euros to 89 cents. Other large German retail chains such as Kaufland, Lidl, Rewe and Penny have also significantly reduced their sugar prices.
This means that the price is almost back to the level it was at the beginning of 2022, as the shelf price for sugar from German retailers' own brands was still 79 cents per kilogram in January 2022. In December of the same year, it had climbed to 1.49 euros.
... Swiss consumers, on the other hand, do not
Consumers in Switzerland are less fortunate. Coop and Aldi Suisse, for example, are currently keeping their sales prices for sugar stable.
"Our prices are primarily based on the cost price. If price reductions are possible, we naturally pass these on to our consumers," explained a Coop spokesperson when asked by AWP. And Aldi also promises to pass on cost benefits - if they arise - to customers. Lidl Switzerland and Denner also promise to do the same when asked.
At least Volg is expecting prices to fall slightly soon. Migros is keeping a completely low profile. The orange giant does not want to comment on its pricing when asked.
But why are prices in Switzerland not falling in line with the global market? The reason is that around two thirds of the sugar used in Switzerland is produced domestically. And the Interprofession Zucker - which consists of various players in the industry such as sugar beet growers and sugar manufacturers - sets a target price for this sugar.
Most market participants will then adhere to this industry agreement. For the current year 2024, the target price is CHF 61 per tonne of sugar beet; according to an agreement already reached, this should remain the same in 2025.
Weather can be a burden at any time
But back from small Switzerland to the global markets. It is unclear whether prices there will remain this low in the coming months.
Migros Bank economist Brivio, for example, warns that the weather and climate could put a short-term strain on supply at any time: "Sugar beet needs dry conditions to concentrate the sugar content. Heavy rainfall between now and the harvest could therefore affect production at any time.
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