Recovery on the sugar market goes by trial and error

The sugar market can leave the absolute low point of April and August 2018 behind for the time being; then the white sugar price on the London stock exchange reached €273 per tonne. Until October, the price climbed to its highest point of 2018: €315 per tonne. However, at the start of the new year the price dropped again to a level of €300.

Cosun expects a slight recovery
Dirk de Lugt, chairman of Cosun, spreekt in the most recent Cosun Magazine about an expected recovery on the sugar market. He cites developments on the global market as the reason, although Dutch growers will not notice this until 2020 at the earliest. The reason for the hint of positivity is that current forecasts show that global production is expected to fall below consumption levels; both for 2018/2019 and 2019/2020.

The International Sugar Organization (ISO) recently lowered its forecast for the global sugar surplus. These figures caused the global spot market for sugar to rise to €400 per tonne. However, this recovery is fragile. In the short term, Brexit will also play a role, provided that the outcome is that the European Union can no longer export sugar to the United Kingdom. 

European harvest remains large
The European market currently accounts for approximately 17,7 million tons of sugar. Despite the 15% drop in production over the 2018 harvest, the total harvest is still 18,2 million tons. Supply exceeds demand. Last season this harvest amounted to 21,3 million tons.

Beet processors calculate a price of €400 per tonne as a base (to be able to operate profitably); the cultivation contracts are also set up for this purpose. However, the current price level is approximately 40% below that. The December contract for 2019 on the futures market today stands at €316 per tonne. The scenario for this year also remains negative and does not cover costs.

Despite the expected decline in sugar beet area In Europe (estimated at 10%), sugar supplies remain high. Sufficient rain in Brazil ensures a larger cane sugar harvest. However, higher crude oil prices make ethanol more attractive, resulting in less sugar being produced for consumption.

Sugar dumping
On the other hand, India is putting enormous pressure on the global market. The government there heavily subsidizes the cultivation and processing of sugar cane. It will invest another $1,5 billion in processing plants and refineries, which will increase exports. A sugar surplus is again expected in the country for the 2018/2019 season, which will then be dumped on the world market. Both Australia and Brazil have already filed anti-dumping charges for these trade practices.

In the meantime it is sowing season started for the 2019/2020 campaign. Cosun reports that 365 hectares have now been sown. That is exceptionally early. Sowing has taken place mainly in West Brabant, Flevoland and the northern clay area. About 100 hectares in each area.