The sugar market is one of the many agricultural markets that has been hit hard by the corona crisis. Supply and demand were clearly out of balance. Rabobank reports in the report 'Outlook 2021: Bull Waves don't break' that the sugar market will become more balanced in the coming season, which will moderate the price increase of the past period.
Due to the coronavirus, demand for sugar fell, while production remained unchanged. As a result, 2020/2021 can be seen as a reasonably balanced year. This is despite the fact that significant shortages were previously expected. A lot of sugar was brought onto the market in the past period, especially from Brazil. Normally, an oversupply like this causes a significant drop in the sugar price, but a delay in the payment of sugar the Indian export subsidies, a decline in European production and the dry weather in Brazil quickly reversed this trend. The sugar quotation on the Liffe rose from mid-September towards pre-corona crisis levels.
What to expect from 2021?
For next year, Rabobank expects that the influence of the above factors will decrease somewhat, causing the sugar quotation to fall back to more normal levels. On the other hand, the bank expects that drought could lead to no 'normal' harvest in Brazil, the largest producer of sugar. A harvest of less than 600 million tons is expected if there is no significant rainfall in the coming months. And with the La Niña weather phenomenon lurking, it is still uncertain what actual production will be.
Another factor is that Rabobank expects the Brazilian real to be stronger in 2021 than this year. In short: Brazilian sugar is becoming more expensive again. This in combination with rising ethanol prices in 2021 and a recovery in demand could lead to a tighter market. In addition, the limited supply in Thailand and the European Union may cause an increase in the quotation for white sugar. The Liffe quote is currently at $411,50 per tonne.