Climate change and severe drought have wreaked havoc on global sugar production, causing a 2% drop in the supply. Despite these adversities, the US is poised to achieve a remarkable feat by setting a new sugar production record of 9.39 million tonnes, as projected by the USDA for the 2023-2024 year.
Of this record output, nearly 4 million tonnes are derived from sugarcane, with the remaining coming from sugarbeets. The acceleration in sugarcane production in regions like Louisiana is attributed to advanced farming methods and genetics that enable a higher yield per acre. Notably, Louisiana persevered through a severe drought this year, yet managed to produce 1.8 million tonnes.
A Fair Deal?
The USDA anticipates a 5.6% increase in retail sugar prices in 2024, burdening consumers. Major food manufacturers, who account for 70% of domestic sugar purchases, argue that elevated producer prices are propelling consumer prices and inflation.
However, producers are grappling with soaring costs too. During the American Sugar Cane League annual meeting, Dr. Robert Johansson, the director of economics and policy analysis at the American Sugar Alliance, stressed the need for a new farm bill, superseding the 2018 legislation, to establish a renewed “safety net” for American farmers.
Significant changes have transpired since the bill’s enactment, including disruptions and alterations in global production and supply chains due to events ranging from the Pandemic to the invasion of Ukraine, not to mention the recent droughts.
Notably, the cost of fertilizer, equipment, and labor has substantially surged, compounding production expenses. Johansson and other proponents of the American sugar industry are determined to lobby in Washington over the next year, advocating for a new bill that aligns with their requisites.
Investment Prospects
Grasping the impact of climate change and geopolitics on US agriculture is pivotal for potential commodity investors. While individual investors may explore participation in the markets by trading futures, this practice can be intricate and inaccessible for many. Even seasoned traders are susceptible to pitfalls.
Alternatively, investing in a commodity ETF, such as those offered by Teucrium Investment Advisors, LLC, presents a viable option. The firm furnishes an array of agricultural funds thoughtfully curated to afford investors uncomplicated and liquid access to commodities funds like Teucrium Sugar ETF CANE.
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