Sugar CEO Warns High Prices May Last a While

(Bloomberg) -- Sugar prices should remain high going into next year on tight global supply, according to the chief executive officer of U.K. sugar producer Associated British Foods Plc.

Futures have rallied more than 20% in London this year -- hitting a four-year high in October -- after frost and drought hurt production in Brazil. Soaring demand for ethanol in Brazil and India, the world’s top two sugar producers, has contributed to the rally as more cane is diverted to making the biofuel.

“Sugar prices will be higher for some while, and we also think that ethanol prices will remain high,” AB Foods CEO George Weston said on an earnings call on Tuesday. “I don’t think the European industry will do much in this year to rectify the tighter supply and lower stocks we’ve seen.”

AB Foods’s sugar business buys almost all of the U.K.’s beet production, and expects sugar output to rise roughly 11% to just over 1 million tons in the 2021-22 year.

Like many European processors, AB Foods uses natural gas as a main energy source for refining sugar. High prices for gas, carbon and logistics are likely to cap any gains in sugar earnings next year, the company said Tuesday.

“We’re hedged out for at least part of the year, but the energy bill is eye-watering,” Weston said.

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