Anyone who bought Easter eggs a few days ago knows something about what we are going to discuss below. And it is that the global economic situation and the energy crisis have an impact on the pockets of millions of Spanish consumers. The War in Ukraine and inflation have hit especially hard on some food products. One of them is sugar. According to the INE, it has been the one that has registered the highest increase, 52.6% year-on-year in Spain.
The problem is that Spain is a country with a deficit in sugar production. That is, it imports most of this product. And it is especially exposed to what happens in the world. On the other hand, sugar is present in many other foods, which are becoming more expensive as a result.
A drastic increase in prices. The future looks quite bleak if we take into account the price spiral that sugar has experienced in recent months. Data from the European Commission reveal a year-on-year increase in February of 78.5%, the highest of all raw materials. To give you an idea: the ton reached €773 that month.
The latest food price index, prepared by the FAO, also indicates that the price of sugar has seen a rise of 6.9%, its highest level in six years. And at the national level? The latest CPI data for February reflect that it is the food that has risen the most in price in the last year, 52%.
The most expensive Easter eggs. A direct example that we found a few days ago was the increase in the cost of the Easter basket. As Ben Laidler, market strategist, commented in this article in La Información, “the price index for the raw materials used to manufacture (sugar and milk) and package Easter eggs has risen a lot so far this year “, something that combined with the increase in the cost of cocoa has made the Easter cakes this year one of the most expensive in the history of Spain.
Because? First, because of the war in Ukraine. As we mentioned before, the rise in the price of many foods derives from the energy crisis that the conflict has generated, turning the market for natural gas and raw materials upside down, and therefore the food industry that uses these resources to keep its factories running. This is precisely what has made the facilities where sugar cane is processed in Brazil (exporter of 28% global) have gone from sugar production to biofuel production. Specifically ethanol, an alcohol that has sugar as a key ingredient and that can be used as fuel. With the rise in energy and oil, their demand has skyrocketed, affecting sugar prices.
On the other hand, there is another big problem in India, the second largest producer. His government reduced exports by at least 45% since last season to contain inflation. In addition, it has been greatly affected by the pandemic and several recent droughts. Everything combined has caused the price of the product to rise 6% only so far in April, as reported by Reuters a few days ago.
Less production in Europe. To all this is added that in Europe the main producers have had two years of bad harvests also due to a greater drought, a reduction in cultivation areas and a drop in the profitability of production. As explained in this Cinco Días article, home production, through sugar beets, is disappearing while farmers turn to more profitable plantations such as corn.
Consequences. The most notable is an increase in the price of all the products in the shopping cart that include sugar. We are talking about hundreds of them, from drinks, chocolates, yogurts, jams, and a long etcetera. Only in bakery products has it made them 28.4% more expensive and the same in jams, 18.4% more, exceeding the average CPI for food. Waiting for one of the toughest summers (with more consumption of ice creams and drinks that contain sugar), consumers will have to tighten their belts.
Image: Leigh Patrick (Pexels)
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