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Weakening rupiah may require sugar price hike, association warns
Aris Toharisman, secretary-general of the Indonesia Sugar Association (AGI), does not rule out the possibility of rising prices for the imported commodity, even though global supply pressure remains manageable.
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A combine harvester cuts sugarcane on Oct. 10, 2023, in Kaplan, Louisiana, the United States. (Getty Images via AFP/Justin Sullivan)
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ris Toharisman, secretary-general of the Indonesia Sugar Association (AGI), has warned that a weaker rupiah, by making imports more expensive, may require a hike in the Indonesian sugar retail price.
Meanwhile, global supply pressure remains manageable and the association does not expect a potential escalation of tensions in the Middle East to have a significant impact on domestic sugar prices.
“If the Middle East conflict continues, logistics costs will increase, and so will sugar prices,” he told The Jakarta Post on Thursday, however, as long as sugar was available in the global market, the effect in Indonesia “would not be too bad”.
"Domestic sugar prices would not go beyond Rp 20,000 per kilogram. They would not depart too far from current prices just yet," Aris said on April 16, as quoted by CNBC Indonesia.
As Indonesian markets returned from the Idul Fitri holiday this week, the rupiah sank to a four-year low against the dollar, buoyed by expectations that a hot US economy will force the Fed to keep rates higher for longer.
Indonesia is reliant on imported sugar to meet most of its domestic demand, with local production accounting for less than half.
Raw sugar is currently trading at around 22.49 US cents per pound based on the Intercontinental Exchange (ICE) Sugar No. 11 Futures benchmark, which is down significantly from the 11-year high of 27 US cents seen last year, and it “would require a poor Brazilian harvest in 24/25 to return sugar prices to 2023 levels”, according to a report published on April 4 by United Kingdom-based sugar manufacturer Ragus.
