Why less means more for sugar

Sugar analysts see global sugar production and supplies for the 2019-2020 season. This is of significant importance for the market, because it heralds the transition from overproduction to a shortage on the sugar market. Analyst firm FO Licht expects production for the current season to be 5,5 million tons below consumption. ISO colleagues in London are talking about a shortage of 5 million tons. The current world stock is 90 million tons. So that sugar mountain will certainly decrease. A further decrease is expected for the 2020-2021 season.

Less European sugar
European beet sugar production is declining slightly this season. 17,49 million tons of beet sugar are expected from the EU, compared to 17,62 million tons last year. A shrinkage of the area by 89.500 hectares is the main cause of this. However, significantly more sugar is being imported into the EU. In the 2018-2019 season, 564.000 tonnes more sugar was imported than a year earlier. Exports decreased by 153.000 tons. The export of sugar in processed form is increasing.

The European Commission estimates that imports will increase to 2 million tons, with unchanged internal use. Exports drop to 1,4 million tons. With these figures, the European sugar stock decreases by almost 500.000 tons, to 1,26 million tons.

Cane sugar production is declining
Of greater importance is cane sugar production in India, Thailand and Brazil. The former country has turned the sugar world upside down by subsidizing sugar exports. This transport subsidy is objectionable to the World Trade Organization (WHO). Rumors are that India may change this to a cultivation subsidy, which is allowed according to WHO standards. Floods in India and Thailand are causing sugar production to decline in these countries. Production and consumption are thus brought to the same level. However, huge Indian stocks must be taken into account.

In Brazil, more sugar is processed into ethanol. Higher fossil fuel prices make this interesting. This concerns 65% of the total harvest in the country. From October 1, only E10 can be refueled at all pumping stations in the Netherlands, as the successor to E5 (Euro 95). More bio-ethanol (10%) has been added to this fuel. The share of biofuels will be further increased in the coming years. More ethanol from sugar or corn is added to gasoline and diesel.

Sugar prices hardly move
Despite the more positive signs in production and consumption, these trends are still barely noticeable in the sugar price. The futures market in London is recording a small plus of €6,70 per tonne in the short term (December contract). However, the March contract is trading €1,49 lower. The raw sugar market in New York also recorded lower figures. Recovery of the sugar price, which also benefits the grower's wallet, must really be seen over a very long term.

Despite the fact that Suiker Unie is asking for more beets for the 2020 crop year asks, the mood among beet growers is not positive. There is even talk of a lot oversupply to Member Delivery Notes (LLBs). Challenges in cultivation, mainly due to the disappearance of the seed coating with neonicotinoids, are the cause of this.