The world sugar market is currently dominated by sugar cane producing countries such as India, Brazil and Thailand. Growing conditions were unfavourable. In addition, the demand for ethanol is increasing, for which a lot of sugar cane juice is used. Does this offer opportunities for beet sugar from Europe?
Rabobank's sugar analysts expect sugar prices to rise slightly to €2019 per tonne in the fourth quarter of 261. A stable price level of €265 per tonne is expected for the next six months. This could increase slightly further in the course of 2020.
Futures markets are falling
The white sugar quotation in London continued to decline for 1 month. The October contract is quoted at €280 per tonne and the December contract at €290. The raw sugar quotation in New York has also fallen, by about €15 per tonne. The average sales prices in Europe are stable at €320 per tonne.
So far, 2018 million tonnes have been exported from the European Union during the 2019/1,41 export season. This is approximately 1,53 million tons less than in the same period in the previous marketing year. Imports were significantly higher at 343.000 tons: 1,48 million tons. This mainly concerns internal imports between the EU-28.
Drought in sugar cane areas
The global market is influenced by a number of things. First of all, it has been very dry in India and Thailand, for example. Due to drought (20% less rainfall in India), sugar cane is now sold as animal feed, of which there is a shortage. The country expects production to drop from almost 33 million tons to 28,2 million tons. Despite the substantial government subsidy, it was not possible to export the requested volume. The low own product makes a dent in the enormous stock. This can have a positive effect on the world price.
Brazil, which trades pennies with India as the world's largest sugar producer, is also seeing its export figures decline. In July, sugar exports reached their highest level this year (1,82 million tonnes), although the figure is below last year's exports. This season, 6,4 million tons were exported, compared to 6,9 million tons last season.
Significantly less exports
Normally, sugar exports increase and these are the peak months. However, the buyers have sufficient inventory and are currently not in the market. In 2018, Brazilian exports reached their lowest level in 10 years. This trend continues this year, with more than 20% less exports in the first 6 months of 2019.
Analysts expect sugar production to drop by 11% and that inventories will also decrease significantly. China, which also produces less, is potentially a major buyer of ethanol. The country has 332 million cars and from 2020 10% ethanol will be added to Chinese fuel, which will increase demand somewhat. The disappearance of the tariff wall for Brazilian sugar offers export opportunities for the country. Since Brazil exports a lot of corn, more ethanol is produced from sugar cane juice. The United States is also seeing an increase in ethanol exports.
Sugar balance changes
Analysts expect sugar prices to rise towards the end of 2019. World consumption is higher than production, mainly because there is less cane and beet sugar. This brings the world balance to a minus of 2,95 million tons. Last season a surplus of 2,5 million tons was achieved. India plays the biggest role in this story.