In the space of 2 months, the trade in Suiker Unie's member delivery notes (LLBs) has experienced a significant price drop. This is the result of a lot of supply and minimal demand. The sector is in a slightly more positive light, but the beet growers have made their choice.
Less than 2 years ago, LLBs were extremely popular among beet growers. Around Christmas 2017, the price soared to a high of €55 per LLB. The months of November and December are the 2 busiest months for trade, which is relatively limited. A maximum of 5%, of the total of 6,5 million proofs, changes hands.
In 2018, 270.000 LLBs were traded, accounting for as many tons of sugar beet. This mainly concerns trading in the free circle, in the case of a company takeover. The share traded between multiple companies is limited. Only a few brokers nationwide act as intermediaries for LLB trading.
Bottom in sight
At the end of September, the supply was between €33 and €36, mentioning that supply exceeded demand. Traders have since announced that the price has fallen further as a result. Business has already been done at a level of €25. This is expected to be about the bottom. This has more than halved the price compared to 2 years ago. The maximum price level is currently at $27 per LLB, insiders say.
Sellers have various reasons to settle for a significantly lower price. The supply comes mainly from Flevoland, where beet growers have traditionally been well stocked in their LLBs. Less available (lease) land, stricter beet tourism rules, conversion to organic and extensification of the cultivation plan are reasons to say goodbye. What plays a role nationally is the difficulty of cultivation due to the disappearance of the neonics seed coating. In 1 or 2 seasons, the growers will have to make an important insecticide to miss.
Damage from yellowing virus
Suiker Unie is careful in making statements about the (financial) damage caused by the ban. The European beet growers' organization CIBE said rather that the damage within Europe is €40 to €100 per hectare. "The damage picture of the yellowing virus in particular varies greatly," says Royal Cosun chairman Dirk de Lugt. "It varies from 0% to 60% infestation in 1 plot. In the southwest of the country it is significantly worse than in the north. We do know that the sugar content in the yellow spots drops quickly by 1,5%."
According to De Lugt it is not possible to draw 1 line. There are also differences in the plots, varieties and soil type within an area. The construction plan also has an influence. Suiker Unie tries to collect as much data as possible in order to draw its conclusions. The Unitip cultivation registration helps with this. "What we do know is that the use of pyrethroids has not been sufficient," De Lugt reports. "Selective agents, like the Teppeki, have done better."
Unfair competition
In total, 7 European Member States granted an exemption for the use of neonics-treated seed for the 2019 harvest. For the 2020 season, an exemption must again be issued to growers. Belgian beet growers, among others, were able to use treated seed. "Of the total Belgian acreage (57.978 hectares), 25% has been sown with treated seed. Due to stricter requirements for propagation, it is not interesting for many growers. Poland also has a strict policy. There, for example, only Polish seed may be coated with neonics. This has happened on about 30% of the acreage (240.900 hectares). It creates unfair competition within the European Union. Germany and the Netherlands support each other in this, but in the European Union we are a minority."
Suiker Unie is now exactly halfway through the 2019/2020 beet campaign and has processed more than 50% of the beet. The sugar content fluctuates around 16,5%. Due to the bad weather conditions, growers do not harvest more than is necessary. Harvesting for storage is slowly starting. There is no rush for late delivery.
Sugar market in a more positive light
The foreman is slightly positive about the sugar market. There are several signals present. Many Member States in the European Union are harvesting fewer beets this autumn. Partly due to drought and partly due to a shrunk acreage. A final harvest forecast is 17,4 million tons of sugar, compared to 1 million tons 17,6 year earlier. The European Union thus scores 2 deficit years in a row and is heading for a third.
De Lugt expects a further decrease in European acreage in 2020. "Growers in Germany and France in particular are stopping. This is causing an area decrease of 8% to 10%. Brexit is also having an impact. British buyers have already covered for 2020, but the sugar deliveries for the 2021-2022 market season present new challenges. Several factories are closing in France and Germany. Initially there would be 5, but that has now increased to 9." The production of Sudzucker also drops by 700.000 tons. In Germany, factories are being dismantled and France has a redundancy scheme. All these facilities are not coming back. It is the second European remediation, after a financially supported remediation in 2006-2007.
Upgrade beet cultivation
For cultivation year 2020, Suiker Unie has the allocation increased to 105%. Chicory processor Sensus, with an area of 4.000 hectares, also has space. There are few switchers. Chicory does not have the extensive character of beet cultivation, but is a specialism. A beet price is expected for this season that is approximately the same as last season. Cosun is conducting research into upgrading cultivation. For example, by extracting protein from beet leaves and fermenting residual flows into green gas. It is a long-term vision. "A price of €60 per tonne is not something you simply achieve, it takes time," says De Lugt soberly.