Domestic price of sugar

The domestic price of sugar is expected to fall by 23.6% in 2024-25 to 119.5 index points. Domestic sugar prices are largely determined by global sugar prices, as over 80% of Australia's sugar production volume is destined for export markets. Since Australia is not as big a producer of sugar as Brazil or India and does not significantly influence world supply, Australia is a price taker in the global sugar market. Average sugarcane yields can be heavily influenced by favourable amounts and the timing of rainfall. According to ABARES, domestic sugar production is set to increase in 2024-25 following a steep production fall in the previous year.

Fluctuating global sugar supplies have contributed to significant volatility in the domestic price of sugar. Growing conditions for sugar cane producers dictate the total sugarcane supply and sugar yields from cane. Global sugar production has risen over the past five years. Below-average monsoons in 2022-23 led India to cut down on their sugar exports, boosting prices. India intends to continue the export ban in an attempt to maintain local stock. Sugarcane is also used to produce ethanol, a substitute for crude oil-based fuel. Brazil's decision to allocate more cane to sugar production and leave ethanol production to corn processors has eased the pressure on the world's sugar supply. Increased sugar output in Brazil has curbed sugar prices. However, recent fires have damaged crops, causing prices to rise in September 2024.

Growing conditions in many sugarcane-producing countries have fluctuated over the past five years, with overall production rising. This trend has contributed to volatility in the world price of sugar, with a significant influx of subsidised sugar pushing global and domestic prices down at the start of the period. However, tight supply conditions and a rise in consumption have boosted prices over past the few years. Overall, IBISWorld forecasts the domestic price of sugar to surge at a compound annual rate of 6.8% over the five years through 2024-25.