Associated British Foods (ABF) Reports Major Revenue Drop As Sugar Prices Extend Their Plunge

Associated British Foods PLC (LON:ABF) reported a 28 percent drop in its sweetener revenues in the 16 weeks prior to Jan. 4, owing to another year of global oversupply and plunging prices.

The big food and beverage retailer, which operates sugar mills in Europe, China and Southern Africa, is expecting a further slump in the coming months because of record-low global sugar prices.

“The further recent fall in world sugar prices may put further pressure on revenues and margins, particularly in China,” the group said, according to Agrimoney.com.

The price of raw sugar dropped below 15.19 cents a pound Thursday morning, hitting a four-year low. The dip was triggered by news that officials in India – the world’s largest producer – decided to subsidize the country’s sugar exports.

“We have decided to give incentives to promote raw sugar as a new product,” said India Food Minister K.V. Thomas on Thursday after a meeting with other ministers, according to the Economic Times.

“Incentives will be given for export of up to 40 lakh (four million) tons for two seasons,” he said.

According to Bloomberg, domestic prices in India are nearly $40 higher per ton than the global average, which will make it difficult for India to compete.

In October, the country’s stockpiles jumped to a five-year high of 8.85 million tons, according to the Indian Sugar Mills Association.

“There’s a surplus globally,” said Yatin Wadhwana, managing director of Sucden India Pvt., to Bloomberg.

“Exporters will need substantial amount as subsidy for exports to take place because world prices have dropped quite a bit in the last two months,” he added.

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(Note: Brown sugar photo by Shutterstock.com.)