The FRED Blog has discussed how changes in global commodity prices for coffee, tea, and cocoa have impacted the price of comfort drinks in the European Union. Today, we compare global and US consumer prices for sugar and discuss why they’re disconnected.
The FRED graph above shows three data series on sugar prices:
- The blue line is the domestic consumer price index for sugar and sweets. This is an index number, reported by the US Bureau of Labor Statistics, that measures the trend in the prices paid by US consumers.
- The red line is the world benchmark price for raw cane sugar ready to be shipped for export. The International Monetary Fund (IMF) uses data on sugar No. 11 futures contracts from Intercontinental Exchange (ICE) to report this price in US cents per pound. At the time of this writing, Brazil is the world’s largest exporter of raw cane sugar.
- The green line is the price of raw cane sugar for delivery at one of five designated US ports with refinery facilities. The IMF uses data on sugar No. 16 futures contracts from ICE to report this price in US cents per pound.
We customized the data to an index with a value of 100 in the first quarter of 1990, when the first IMF commodity price data are available, to better compare the changes in global commodity prices to the change in the US consumer price index. We can’t sugarcoat it: These indexes don’t tend to move in sync.
Between 1990 and 2009, the price of raw cane sugar delivered to US refineries was remarkably stable. During that period, consumer prices rose steadily while international prices bounced up and down. During the next several years, the US and the global prices for raw sugar moved in sync; but their spike in 2011 was not fully reflected in the domestic CPI in the US. Between 2020 and the time of this writing, the co-movement between rising raw sugar prices and rising consumer prices for sugar and sweets is more noticeable.
So, what’s the story behind the numbers?
This brochure about the ICE’s sugar futures contracts provides an overview of the international sugar market and the factors that hinder the free trade in this commodity. In short, the disconnect between international and domestic prices stems from subsidies to growers, import restrictions, and other regulations by producers and consumers organized in trade blocs.
Most recently, the US Department of Agriculture’s October 2023 “Sugar and Sweeteners Outlook” by Vidalina Abadam and David Marquardt describes how the exceptional drought conditions in the southern US are reducing the projected domestic sugar supply in 2023-2024. Trade partners are also experiencing droughts, and thus international commodity prices and domestic consumer prices are rising faster than in previous years.
How the graph was created: Search FRED for and select “Consumer Price Index for All Urban Consumers: Sugar and Sweets in U.S. City Average.” Next, click on the “Edit Graph” button and use the “Add Line” tab to search for and add “Global price of Sugar, No. 11, World.” Repeat the previous step to add “Global price of Sugar, No. 16, US.”
Suggested by Diego Mendez-Carbajo.