The global sugar market is facing a major crisis, with prices soaring to record highs, driven primarily by the weather events in El Nino which led to a supply squeeze from major sugar-producing countries including Brazil (due to rain-delayed harvest), Thailand (due to drought and competition with high-priced cassava), China, and India amongst others.
Data from the World Bank revealed global sugar prices have increased by 26 percent to $0.53/kg in August 2023 from $0.42/kg in January 2023. The price is also a 36 percent increase from $0.39/kg in August of 2022.
This increase in prices flows through to the domestic market as Nigeria’s local industry is still largely dependent on imports of raw sugar. The average price of sugar according to the National Sugar Development Council (NSDC) rose by 44.2 percent to N835,400 per metric ton in July 2023 from N579,400 in the corresponding period in 2022, while data from the National Bureau of Statistics show that sugar imports in the first quarter (Q1) of 2023 ranked fourth on the list of imported food items amounting to N75.79 billion.
Ayodeji Ajilore, investment manager at ARM Investment Managers, said the surge in the global sugar price is largely tied to the dual concerns of demand and supply.
“While demand has continued to rise as the global economy aims for pre-pandemic levels, the encumbrance coming from climate issues in India for one, has impaired the supply side of the balance,” he said.
The elevated global sugar prices mean higher market price of sugar in the domestic market which translated to higher revenue for industry players like Dangote Sugar Refinery (DangSugar), BUA Foods, and Golden Sugar Refinery (a subsidiary of Flour Mills of Nigeria Plc) who accounts for over 95 percent of the sugar market in Nigeria, according to the Sugar Annual Report of the United States Department of Agriculture.
Data gleaned from the Nigerian Exchange Group (NGX) reveals that revenue generated from sales of sugar and molasses by DangSugar accounts for 99.4 percent of total revenue generated in the first half (H1) of 2023 (N202.78 billion). DangSugar’s revenue from the sale of sugar grew by 9.51 percent to N201.59 billion in H1’2023 compared to N184.08 billion in the corresponding period of 2022.
Similarly, BUA Foods revenue from the sale of sugar and molasses grew by 80.11 percent to N196.5 billion in H1’2023 from N109. 1 billion in H1’2022, thereby accounting for 61.23 percent of its total revenue generated during the period (N320.93 billion).
BUA Foods in an earning release statement attributed the increase in revenue to volume and price adjustments within the period. It also said “contribution margin increased to 40 percent from 30 percent recorded for half year 2022. This was driven by sales volume growth, price adjustments and export sales within the period.”
The company also said “volume sold increased significantly by 29.6 percent to 344,130 tons within the period (H1 2022: 256,509 tons). Fortified Sugar sales sustained her market share with a 176.5 percent increase in sales to ₦151.5 billion.”
Golden Sugar on the other hand, grew its revenue from 20.85 percent to N66.49 billion in the three-month period ended 3oth June 2023 from N55.02 billion in the corresponding period of 2022.