The World May Be a Whole Lot Sweeter in 2012

Although it may seem like a product that many people cannot get enough of, many are forecasting a major sugar surplus this year and next.  The estimates are that sugar supplies will outpace demand by more than 9 million metric tons.  That means that there will be a surplus in raw sugar worldwide during the next year.

That will have dramatic implications all throughout the market.  Anything that uses sugar in its creation will likely see a price decrease.  That of course is a great thing if you have a sweet tooth.

Although there is a surplus in the supply of sugar, it is not due to any sort of decrease in demand.  The demand of sugar has increased annually by a rate of 2.2% for the past decade worldwide.  Some estimates put the demand growth rate jumping to 2.7% in this next year.  Therefore, demand is actually increasing at a faster rate than any time before.

Due to the increase in sugar being higher than the increase in demand, there will be a surplus in the market.  As both factors increases, both curves shift to the right.  That implies a higher quantity of raw sugar in the market worldwide, but at lower prices (due to the surplus).

Although the article never specifies what causes the surplus, it may be assumed that the supply was driven up by either technology or lower production costs.  This means that the producers are becoming more efficient at what they do.  Therefore producing more product.

Source: http://www.businessweek.com/news/2012-02-07/sugar-faces-a-big-surplus-lower-prices-coca-cola-says.html