At the end of April, the European futures market price for refined white sugar headed for increases for the first time since that month. The price will also hold up in May, but for how long? For the global price of raw sugar, it's a completely different story.
Cosun members probably don't have to wait for a big 'Aviko bonus' for the 2020 harvest. So it is the sugar price that has to do it this season. On the London Liffe futures market, the price for refined white sugar reached its lowest point of €284 per tonne. Then an increase started. In mid-May the rate is €332 per tonne. This is 14% more than a year earlier. Within the EU, prices were at a similar level earlier this year. In region 2 (including the Netherlands) at €326, although spot prices range between €450 and €460 per tonne.
Raw sugar price
For raw sugar it is a completely different story. Prices on the world market fell sharply, although the bottom remains robust for now. This decline has two causes. On the one hand, there is the imploded fuel market. In addition to oil, the demand for bioethanol has also decreased significantly. This means that countries such as Brazil choose to produce consumer sugar, instead of processing it into ethanol.
The second cause is found in sugar cane. Brazil had 2 seasons with significantly lower sugar cane production. According to market analysts from FO Licht, the Brazilian harvest is returning to normal levels this season. This means that 9 million tons more sugar is produced than last season. Due to the corona crisis, world sugar consumption is growing less rapidly than previously thought.
Production shortage remains
Nevertheless, there is still a production shortage worldwide. For the current sugar season (2019-2020), this means a deficit of 9,6 million tons. The largest in 11 years. This gap is expected to be reduced and will only amount to -1,5 million tonnes next season.
It's somewhat of a shot in the dark, as production in Asian countries is shrouded in mystery. India is expected to produce 8 million tons less sugar this year and less sugar is also expected in Thailand due to persistent drought. Traders are trying to analyze world yields, expected consumption and demand in a declining oil market. Not an easy task. This uncertainty puts pressure on world prices.
More demand for white sugar
As mentioned, refined sugar can maintain its premium for now. The question is for how long. Brazil may be heading for higher production levels, but the country mainly supplies brown sugar. India and Thailand in particular are big players for white sugar, and less is expected of them. Sugar stocks are also not large in Europe, which is why prices are holding up. At the beginning of this year, the sales price within the EU increased, although it is still not possible for processors to make a profit.
The latest European figures show a sugar production of 17,35 million tons for the 2019 harvest year. A decrease of 2% compared to the previous year, which is mainly due to a decreasing area (-5,5%). The European area will continue to decrease in most countries in 2020, due to the situation on the market and decisions by several processors in Germany and France, among others. The year has also gotten off to a special start. Sowing went well on time, but persistent drought and recent heavy night frosts have ensured that crop growth is far from ideal.
Difficult start
This is also the case in the Netherlands, reports Cosun. The position is very mediocre and in many cases there are only few plants. In mid-May, 500 hectares were sown. Mainly due to drought damage. Drought and frost also cause problems with weed control. In the southwest, growers are alert to the aphid situation.