The sugar market is struggling to sustain the recovery. Since the corona crisis, the price of sugar has been under pressure worldwide. The revival that could be seen in May seems short-lived for the time being.
Currently, in the Netherlands and the rest of Europe, attention is mainly focused on the upcoming sugar beet harvest. The yield forecast has been adjusted downwards by the European Commission. It MARS Bulletin published this week still predicts a yield of 86,6 tonnes per hectare for the Netherlands, which is more than 4% more than the 5-year average, but EU-wide volumes are estimated to be lower. An average yield of 73,5 tons per hectare is expected, which is slightly less than the average in recent years (-1,4%).
Great powers determine
A smaller harvest in combination with the slightly decreased sugar beet area compared to last year could have an effect on the supply of white sugar in the European Union. However, it remains to be seen whether this will really make a difference in the recovery of the sugar market. The EU is in third place when it comes to global sugar production with a share of 3%. Superpowers Brazil and India lead the way with an estimated share of 11 and 16% respectively. And that share may well be larger this year than usual.
Brazil in particular, the world's largest sugar exporter, is seeing a sharp increase in stocks this year. The sugar cane harvest in the country was not disappointing and most of it is actually used for sugar production. The corona crisis has put considerable pressure on the demand for (bio)fuel. Producers are choosing eggs for their money and focusing on more sugar and less ethanol.
Almost half more sugar
Unica, the Brazilian trade association of sugar cane processors, announced in mid-August that total sugar production so far this season is no less than 48% higher than last year. The value of the Brazilian real against the dollar also plays a major role. This has been at a low level since March and that makes Brazilian sugar interesting for the rest of the world.
Meanwhile, India, the world's largest sugar producer, is struggling with a large domestic surplus for the third year in a row. Demand for sugar has declined, prompting producers to gradually switch to ethanol production. The government is also pushing to put a stop to overproduction and falling prices of sugar. Insiders say that it is not easy to make the switch and expect that India will not succeed in reducing overproduction. Meanwhile, the country cannot compete with the low Brazilian sugar prices.
Fragile sugar price recovery
In short, there is no shortage of sugar for the time being and this is reflected in the price development. The final sugar price on the Liffe in London was a paltry €26 per ton on August 360. That is considerably more than at the height of the corona crisis, when the price almost fell to the €300 mark. However, the pre-crisis level, where the sugar price finally started an upward movement and peaked considerably, is still far out of reach. The recovery is fragile and can take a long time.