Quantifying the impact of Ramadan on global raw sugar prices

Each year during the month of Ramadan (Muslim fasting month) consumption of sugar increased dramatically across the globe as Muslims traditionally break their fast with some sweet drinks or products. Since Muslims use lunar calendar, the months are not fully aligned with the Gregorian calendar or with the seasonal calendar for agricultural crops. In this paper, we quantify the impact of Ramadan on both the price and its growth of global raw sugar price. To set the stage for the empirical work that follows, we employ a dummy and a fractional variable to capture Ramadan in order to overcome the asynchronicity of time between Ramadan fasting (which is based on Islamic lunar calendar) and movement in prices (which follows the Gregorian solar calendar). In order to capture seasonality of production in sugar production, data on sugar price spans over thirty-four years so that the Islamic calendar makes a complete cycle of the Gregorian calendar. Using ARIMA and UCM models, we find strong evidence that monthly raw sugar prices in the global market increases by roughly 6.06% (or $17.78 per metric ton) every year ahead of Ramadan.