Raw sugar prices spiked to their highest level in 16 months Thursday, as supply concerns outweighed Britain’s recent Budget announcement making it one of the first countries to introduce a sugar tax on soft drinks.
Raw sugar for May delivery surged 3.4% to $15.99 on the ICE Futures US exchange Thursday, its highest settlement since November 25, 2014. The move culminated an eventful 48 hours for the soft commodity, which became the centre of attention after UK Chancellor George Osborne announced a new tax on sugary drinks.
“I am not prepared to look back at my time here in this Parliament, doing this job and say to my children’s generation, ‘I’m sorry. We knew there was a problem with sugary drinks. We knew it caused disease. But we ducked the difficult decisions and we did nothing,” Mr. Osborne said in his controversial Budget announcement Wednesday.
The proposed tax, which will be introduced in April 2018, is expected to generate an additional £11 billion in revenues by 2020. For Mr. Osborne’s Conservatives, the decision was “one that takes bold decisions so that our children will grow up fit and healthy.”
The commodities market was on high alert Wednesday morning, as Mr. Osborne and the Office for Budget Responsibility (OBR) had been rumoured to be considering a new tax levy. Sugar futures experienced heavy volatility Wednesday before turning higher toward the end of the day. They would resume their uptrend on Thursday, joining a broader commodities rally that was triggered by a dovish Federal Reserve.
Tate and Lyle
However, not everyone was let off the hook. Tate and Lyle plc, a British-based agribusiness that is listed on the London Stock Exchange, tumbled immediately after Mr. Osborne mentioned the controversial tax levy. Share prices plunged 2% in about six minutes before staging a modest recovery later on in the session. Share prices fell again Thursday, perhaps in belated response to the Budget announcement that has many investors wondering about the implications on sugar producers and businesses that sell soft drinks and other sugary products.
