An unprecedented spike in sugar prices worldwide has been observed, primarily as a result of adverse weather conditions associated with El Nino, damaging crops.

As per an Associated Press report on Sunday, the surge in sugar prices has hit its highest since 2011.

The abnormal weather conditions have severely affected India and Thailand, the world's second- and third-largest sugar exporters, leading to a significant reduction in global supplies. A 50-kilogram bag of sugar, which cost $66 a week ago, is now priced at $81, resulting in a dwindling customer base for traders.

The United Nations Food and Agriculture Organization predicts a 2% drop in global sugar production in the 2023-24 season compared to the previous year. Consequently, sugar reserves worldwide are at their lowest since 2009. The situation is made worse as sugar has increasingly been used for biofuels like ethanol.

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While Brazil, the largest sugar exporter, could help to bridge the supply gap, its harvest will only be available later in 2024. In the meantime, import-dependent countries, especially in sub-Saharan Africa, are left vulnerable. Countries like Nigeria, which imports 98% of its raw sugar, are feeling the pinch.

Unfavorable weather conditions due to El Nino have also led to India experiencing its driest August in over a century. As a result, India is likely to see a decrease of 8% in its sugar production this year, according to the Indian Sugar Mills Association.

In the coming months, the situation is expected to be further exacerbated by population growth and increasing sugar consumption, straining the already low sugar reserves, warns the FAO. Global sugar reserves are sufficient for less than 68 days to fulfill the world population's demands, down from 106 days in 2020, according to USDA data.

One particular ETF to note given the situation is the Teucrium Sugar Fund (NYSE:CANE), which reflects the performance of the sugar futures market by tracking the price movements of sugar futures contracts.

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This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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