LA QUINTA, CALIF. — The consensus from market analysts speaking at the International Sweetener Colloquium is that domestic sugar prices for the 2023-24 marketing year are up, and they’re likely going to stay up or move higher.

Robust demand amid stubborn inflation was a key supportive element, but analysts spotlighted supply issues as a major driving force behind recent price hikes. Constrictions due to two separate force majeure declarations in 2022 along with a growing reduction in intended domestic acres planted to sugar beets in 2023 were limiting supply factors. Another factor was limited import capacity.

“Mexico is a critical factor,” Frank Jenkins, president of JSG Commodities, said during a Feb. 27 presentation at the Sweetener Colloquium in La Quinta.

After suffering from lower yields due to inclement weather throughout its production cycle, Mr. Jenkins said the current cane crop in Mexico will be unable to meet the US target quantity of 1.3 million tonnes as it only has about 1 million tonnes available for export. Estimates for Mexico’s sugar production in 2022-23 ranged from 5.5 million tonnes to about 5.8 million tonnes, compared with 5.9 million tonnes as the current US Department of Agriculture forecast. But Mr. Jenkins said Mexico’s production levels would need to be closer to 6 million tonnes to satisfy domestic needs in Mexico and the export limit demand from the United States. He forecast Mexico’s production at 5.5 million tonnes.

Humberto Jasso, executive president of the Mexican Sugar Chamber, acknowledged the country’s sugar production struggles but countered that shipments of sugar to the United States from Mexico have not been affected. Mr. Jasso said there was difficulty in forecasting overall production levels for 2022-23 due to atypical rains in November and December that affected sugar yield, but he asserted this would likely be offset by the historically high level of acres planted to sugar cane.

Additionally, prices for corn sweeteners may move higher in 2024 depending mainly on corn prices, but they also were influenced by unforeseen product demand and limited refining capability.

“The corn wet milling industry is in a new age,” said Craig Ruffolo, vice president – commodity specialist, McKeany-Flavell Company Inc., explaining that several plants across the country have contracted their capacity and closed several mills which, in turn, has significantly cut corn milling capacity, driving mills to prioritize the production of higher-priced products. It’s a situation that has taken the industry by surprise, Mr. Ruffolo said.

“We’ve been on a 22-year run where demand for high-fructose corn syrup was declining, but then demand went up,” Mr. Ruffolo said, adding the high price of sugar was another supportive element as buyers currently don’t have a cheaper sweetener alternative to turn to. And rebuilding frontend corn wet milling capacity to meet renewed demand was unlikely, especially after the industry spent years to consolidate operations.

Analysts agreed inflation factors from elevated costs spanning all commodities to operational struggles with recruiting and keeping labor were a large contributor to high prices. But inflation and high sweetener prices also have potential to produce demand destruction, which may prove bearish long term.