Global output facing climate change challenges

PETALING JAYA: Climate change is challenging the supply of sugar, leading to global production shortages and an increase in raw sugar prices worldwide, say sugar producers.

MSM group chief executive officer Syed Feizal Syed Mohammad said climate change is one of the key factors contributing to the high prices of raw sugar today.

The group is one of the top sugar producers in Malaysia.

He highlighted that global warming and extreme weather events have taken a toll on major sugar-producing countries such as Thailand, India, China and Bangladesh, leading to a decline in sugar production.

China, for instance, has seen a significant increase in sugar imports, with their net importer status rising to six million tonnes from the usual four million tonnes.

Similarly, India’s export capacity has been affected, and severe weather conditions, including floods and droughts, have adversely impacted Thailand’s sugar crop production.

However, Brazil, which faced weather-related challenges earlier this year, has recovered, resulting in a surplus in production – but the decreases in India and Thailand cancel out this increase.

The global demand for sugar is estimated to increase by approximately two million tonnes annually, leading to a deficit of over five million tonnes in the global market.

This shortage has put significant pressure on raw sugar prices, causing them to double 2021 prices and contributing to 80% of costs for related industries.

Another producer, Central Sugars Refinery (CSR) Sdn Bhd, said the spike in global raw sugar prices over the past few years has resulted in negative profit margins for the sugar industry.

The rising price of crude oil has increased expenses related to natural gas, a crucial input for sugar refining processes. Refiners’ profitability is further strained by surging natural gas prices, the company said in a written reply.

The weakening ringgit has also resulted in higher raw material costs for refiners, as raw sugar purchases and freight are transacted in US dollars.

Also, the Covid-19 pandemic and global disruptions have led to increased freight costs.

“Retail sugar prices have increased by only one sen over the past decade, from RM2.84 to RM2.85 per kg,” CSR said.

Despite facing numerous challenges, these sugar producers have expressed their commitment to ensuring an ample supply of white sugar to maintain food security.

However, the industry has called on the government to reconsider price controls to balance conflicting interests in the fluctuating global commodity market.

Recently, the government announced plans to unveil a “new strategy” to address the issue of sugar prices, responding to calls for an increase or a flexible pricing approach.

Deputy Domestic Trade and Cost of Living Minister Fuziah Salleh said the sugar industry will “crash” if its current price structure is not reviewed.

She said the strategy is in its final stages of discussion with other ministries and relevant stakeholders, and the views of industry players and small traders have also been considered during its development.

In comparison with regional peers, Malaysia’s retail sugar prices are the cheapest in the region, with the Philippines limiting its sugar price to RM8.50/kg, followed by Singapore and Vietnam both above RM6/kg, Indonesia at RM4.40/kg, and Thailand at RM3.20 to RM3.50/kg, according to MSM.