Fitch Solutions said on Thursday it sees raw sugar prices averaging 2% higher this year as production will likely disappoint in various regions including Europe and India, while demand in China should recover.

The research arm of credit ratings agency Fitch Group said it sees raw sugar rising from an average 18.6 cents per lb last year to 19 cents this year, historically elevated levels that bode ill for policymakers' attempts to cool food inflation.

On the supply side, Fitch cited uncertainty over European production following a pesticide ban, adverse weather conditions and the continued diversion of sugarcane towards ethanol production in India, the world's second-largest sugar producer.

On the demand side, it cited the relaxation of China's zero-COVID strategy as a positive factor.

Still, Fitch's average forecast for the year is below current trading levels of around 20 cents per lb. It said this is because it sees top producer Brazil's output hitting 38.1 million tonnes, representing a year-on-year increase of 7.6%.