An improvement in prices on the sugar market is expected at the beginning of 2020. The mood in the European Union has now turned and the low point is behind us. Does this also mean that the beet price for 2019 will be higher?
The recovery of sugar prices in Europe is gradual but slow. Prices have increased, especially in EU member states where there is a sugar shortage. There the average price level in October is almost €400 per tonne. In the Netherlands, among others, this is €320 per tonne.
Season of shortages
All analyst firms now agree that the global sugar supply is decreasing or increasing less than previously thought. The International Sugar Organization (ISO) estimates a decrease of 6 million tons for the 2019-2020 season. A reduction is also expected for 2020-2021. FO Licht writes about 6,5 million tons and LMC even 8 million tons. World production is estimated to remain the same or decrease slightly. An important factor is how much cane sugar is used for the production of bioethanol. The biofuel price is at a high level, making it attractive to use sugar.
The harvest forecast for 2019-2020 in the EU is not yet complete. This currently stands at 17,33 million tons of sugar. A decrease of 300.000 tons compared to the previous season. Production was also 17% lower than the previous season. In addition to an erratic growing season, the decrease in acreage is the cause of this. In the Union, 88.400 hectares fewer sugar beets were sown.
European production
In the Netherlands, the sugar beet area will increase again next year. Suiker Unie sets the allocation at 105%. If the area increases proportionally, it will go from 79.210 hectares to 83.107 hectares. In 2017, the area was still well over 85.000 hectares. This probably doesn't happen in other countries. In Germany and France, the two largest EU sugar producers, factories are closing and processors are downsizing.
Neonics waiver
Poland (sugar producer number 3) has suffered 2 extremely dry years. Even now it is still dry. The beet price is very low, which means there is little enthusiasm among growers. However, Polish arable farmers have once again received an exemption for the use of seed coated with neonics. The condition is that the seed is of Polish origin, which is approximately 35%. Not every farmer sows coated seed.
Due to the lower production, the European Commission assumes a sugar balance that will decrease by 300.000 tons and amount to 1,51 million tons. Because the European price level is at a low level, there is little reason to import more.
Beet price 2019
What does this mean for the beet price that Royal Cosun will pay out at the beginning of 2020 for the 2019 harvest year? There are already whispers in the corridors that the amount does not differ much from 2018, which was previously feared. Last year the price was €35,59 per ton of beet put down. An amount of €2019 is now also being discussed for 35. One of the main reasons for this speculation is that the Cosun subsidiaries have performed exceptionally well and thus literally keep the price high.
In 2017, Cosun paid out €45,62 per tonne. No one therefore considers €35 as high. However, if we look at other Member States, it is clearly visible how it can be. The British processor British Sugar offers growers a contract for just under €2020 per tonne of beets for 2021-23. In Poland this is slightly lower, but growers have linked support that slightly increases the hectare balance. The cooperatives in Germany and France pay slightly more to their member growers, but for them too a €30 price is only feasible on a gross basis.
Low levels
A comment that must be made is that the price presented by Cosun is based on 17% sugar. This year, that level is hardly feasible for many growers. At the end of December the levels are still more than one percent below last year. The campaign average is now 16,4%, but we also find 15% in the list. Only Texel scores 17%. Suiker Unie will close the beet campaign around mid-January. Beet seed can still be ordered until January 3.