Ingredients in Focus is Food Dive’s bite-size column highlighting interesting developments in the ingredients sector.
Brazil, the world’s leading sugar exporter, is facing an unprecedented outbreak of fires in its sugarcane fields. And as a result, consumers are facing a not-so-sweet price hike.
The ingredient’s prices have surged by 4.2% and the fires have disrupted the entire supply chain. Brazil’s largest sugar group Raizen SA estimated that about 1.8 million tons of its sugarcane, including what it sources from suppliers, had been affected by the fires, amounting to about 2% of the total expected yield for 2024/25, according to Reuters.
The gravity of this year’s fires have the potential to be much heavier than previous ones in 2021, according to a Bloomberg interview with Mauro Virgino, trading intelligence lead at Alvean.
On Aug. 29, the ingredient faced a five-week price high. And around 80,000 hectares of sugarcane fields were burned in the last week, according to data from Orplana, an association of sugarcane growers. That accounts for a little over 1% of Center-South’s cane area of 7.65 million hectares.
The fires have been yet another negative factor for the world’s largest sugarcane producer.
“Environmental issues, driven by climate change, present significant challenges for the future of the sugarcane industry,” Ofir Ardon, chief business officer at crop supply intelligence company Agritask, said in an emailed statement to Food Dive. “These include droughts that reduce yields, extreme heat at night that slows sugar accumulation, increased pest and disease infestations, and heavy rains that increase the risk of floods and soil degradation.”
The cane sugar market is already strained with more consumers turning to alternative sweeteners.
Most consumers (55%) are concerned about their sugar intake, according to a HealthFocus International report, and sugar reduction is the number one dietary trend globally.
Products such as sweet proteins, stevia leaf extracts and monkfruit, among others are taking precedent to cater to the needs of consumers.
Although the direct land hit from the fires is small, experts said that mills will still lose sugar production from those burned fields next year, according to a Reuters report. Sugarcane is usually allowed to regrow five times before it is replanted at a significant cost to the producer, according to AgNews. Some of the fires destroyed fields that had already been harvested.
“Supply disruptions will also impact the by-products of sugarcane, like bagasse used for electricity generation, and methanol, further affecting the profitability of sugar mills,” Ardon said. ‘In the long term, companies will need to invest in weather-resilient technologies to manage this volatility.”
The cane sugar market was valued at over 2 trillion in 2023, and is expected to grow at a compound annual growth rate of 1.3% through the forecast period until 2030, according to data from Maximize Market Research.
“Given that sugarcane milling is highly localized due to the high transportation costs and time sensitivity, sourcing sugarcane from nearby regions can be challenging,” said Ardon. “When weather disrupts one mill, nearby areas are often similarly affected. However, suppliers, especially trading companies, can look to source sugar from other regions or countries where sugarcane production is less impacted by climate issues.”
The world’s largest sugarcane production site is Brazil, though other countries like India, China, Pakistan and Thailand also produce the commodity.
Cane sugar is not the only ingredient being affected by environmental factors as of late.
Coffee, cocoa, and olive oil have all faced highly publicized supply chain woes in recent months, while some companies have even gone as far to replace the ingredients in products they’re traditionally included with the help of technology. Voyage Foods, for example, is making cocoa-free chips and melting wafers.
Vanilla has also faced a slowing supply due to flooded fields in its largest production region of Madagascar. As a result, food companies were forced to look to other regions like Indonesia and Mexico.
