Sugar price reaches 4.7 soles per kilo: what is the reason behind the rise?

There are internal and external factors that influence the rise in prices, both of sugar and other products in the basic basket.

The price of sugar is rising by 38% so far this year. People are worried about it, and they have generated a demand of 1.25 million tons annually. For Wednesday, March 23, a price of S/ 4.77 soles per kilo was recorded, according to the application “Mi caserita”.

This price was recorded in the district of Lince, in the Lobatón N°1 market and is the national brown sugar in bulk. In addition, according to the Price and Supply System of the Ministry of Agrarian Development and Irrigation (Midagri), in the country's a href="https://www.infobae.com/america/peru/2022/03/01/invasion-de-rusia-a-ucrania-aspan-advierte-elevacion-del-precio-del-pan-tras-conflicto-armado/" rel="noopener noreferrer" target="_blank"bwholesale markets a kilo of sugar rose from S/ 2.76 soles in January to a current price of approximately S/3.80 soles per kilo.

This figure represents the biggest uptick in the last 12 years. According to Midagri sources, one of the factors behind this rise is the decline in sugar production levels, as well as the increase in production costs, due to conflicts between Russia and Ukraine. This conflict has led to an increase in the cost of inputs due to the reduction in imports.

On the other hand, the price increase would also be due to the fact that this product part of domestic production would be sold to the foreign market, which would reduce the supply of domestic sugar. Therefore, in the face of a lower supply of sugar in the country, the costs of obtaining the input rise.

THE BASIC FAMILY BASKET ALSO ROSE

In addition to sugar, there are other main products in the basic basket that are priced higher than normal. Bread, rice, legumes, chicken, fuel, among others, have seen an increase; which undoubtedly affects the poorest sector of the country.

The economist and former Minister of Agriculture and Housing portfolios, Milton Von Hesse, argued that there are two factors that are influencing the rise. The first is domestic and has to do with the seasonality of some products such as potatoes, which are not harvested in months such as February and March, and the rains that are generated and which make it more difficult to bring food products to the destination markets.

The second factor, and one that needs to be taken more into account, is related to the external situation, is the conflict between Russia and Ukraine. “There are important markets that are being affected. The first of these is oil that has risen in recent weeks and that greatly complicates the price of truck freight and the cost of energy because there is still a lot that is produced from fossil fuels,” he admitted to the Chamber of Commerce magazine.

“Along with oil, we have also seen that fertilizer prices have risen, urea is an important fertilizer that is widely used in Peru,” he says.

Von Hesse assured that the war also affects some products that Ukraine produces such as wheat and other cereals, which are seeing a high increase in their prices, all as a result of the armed conflict. “If wheat rises, bread goes up, as well as dairy products and this pushes the cost structure of domestic production,” he said.

“The other problem is food production. Russia and Ukraine are known as the granary of Europe because it provides everything that is grain and food to this community and since there are problems in both countries, the price of these commodities increases,” he added.