Bullish Post-Easter Sentiments Prevail Owing to Tight Global Supplies

Easter is one of the most popular holidays, celebrated in 95 countries. One of the highlights of the festivities is the food, with favourites such as Easter eggs, Easter bunny-shaped treats, and chocolate-filled candy. The demand for these products has led to elevated prices of highly sought-after ingredients, such as eggs, sugar, and cocoa, over the past month leading up to Easter.

An example of this bullish trend is the price of eggs in the US and sugar prices in the UK. According to the US Bureau of Labor Statistics, the price of a dozen grade A eggs rose to about USD 4.88 leading into the Easter weekend, a 16% MoM increase. Morrisons and Lidl, two leading supermarkets in the UK, hiked the price of Silver Spoon and own-label sugar in March, with the average price of sugar rising to GBP 0.99 per 500g at both retailers, a 52% increase compared to the previous year, while at another retailer, Waitrose, Silver Spoon sugar rose to GBP 0.80 per 500g in March, a 6.7% MoM increase. According to the World Bank, global sugar prices also rallied to a record high of USD 0.45 per kg in February.

Prices of most products that trade high during Easter usually drop following the conclusion of the holiday. However, the fundamentals reflect a bullish trend for eggs, sugar, and cocoa in 2023.

Tridge expects a slight dropoff in egg prices towards the end of April following the conclusion of the holiday. However, egg prices look to trend upward coming into May owing to the continued spread of the bird flu virus. According to the World Organisation for Animal Health (WOAH), between October 2022 and February 2023, the virus resulted in the loss of over 100 million poultry, more than three times the number recorded in the same period a year earlier, which ended with record losses from the disease. This crisis has led to global egg shortages, which have evoked bullish sentiments. (Read more here)

Cocoa prices are expected to trade upward after the Easter weekend, as the holiday was not the main price driver. Instead, low cocoa bean arrivals and concerns regarding cocoa bean contract fulfilment influenced prices more. The effect of these variables could persist throughout the rest of April, owing to reduced cocoa supplies from Ivory Coast, the largest global supplier of cocoa. The Ivory Coast’s Department of Agriculture announced on the 31st of March that the country’s mid-crop is expected to fall to 450K mt, a 25% YoY decrease due to the detrimental effects of pests and disease on the country’s cocoa crop. As a result, cocoa futures remain elevated. For the week ending on the 31st of March, May ICE NY Cocoa (CCK23) closed at USD 29.33/lb, up 10.9% YoY, and the highest in over two years, while May ICE London Cocoa #7 (CAK23) closed at USD 21.59/lb, an increase 22.6% compared to the previous year, and the highest in over three years.

Source: Tridge, ICE

Global sugar prices are also expected to remain high following the Easter holiday due to tight global supplies. According to the Indian Sugar Mills Association (ISMA), the 2022/23 sugar production estimate dropped to 34 million mt in Jan-23 from a previous estimate of 36.5 million mt in Oct-22 due to adverse weather conditions. According to the US Climate Prediction Center, the La Nina event has ceased, as a result, an El Nino weather pattern could develop in the second half of 2023, resulting in heavy rains in Brazil and drought in India, thereby negatively affecting sugar production. Additionally, ISMA expects sugar mills to divert about 5 million mt to ethanol production in 2022/23, an issue that Tridge has followed closely (Read more here). Another bullish factor is the strengthening of the Brazilian Real against the USD, climbing to a two-year high on the 31st of March. This discourages Brazilian sugar producers from exporting their sugar as they would receive less revenue for their produce as sugar exports are priced in USD. As a result of these factors, sugar futures have traded up over the past few weeks. For the week ending on the 31st of March, May NY World sugar #11 (SBK23) closed at USD 0.22 per lb, up 14.8% YoY and the highest in over six years.

Source: Tridge, ICE

If the fundamentals hold up, the price of eggs, sugar, and cocoa will remain high for the coming month. However, preparations for bird flu vaccinations are ongoing in the EU, with the US likely to follow suit. This could stabilise the spread of the bird flu and bring egg prices down later in the year.

For related stories, please refer to the links below.

1. The Impact of the Worsening Bird Flu Crisis on Global Markets

2. Low Sugar Production in MY 2022-23 Results in an Export Cap for Indian Sugar