World Sugar Price Volatility Intensified by Market and Policy Factors

Abstract

Rising pressure on sugar prices was intensified by supply disruptions in 2009, driving prices to double the long-term average. Higher production costs and growing ethanol use in Brazil set the stage for higher prices, but policy-induced production swings among Asian countries are the main source of price volatility in world markets. Although dramatic fluctuations in world prices have affected U.S. sugar prices, domestic sugar policy continues to drive U.S. sugar price movements.