Beet cultivation throughout Europe less interesting

European sugar producers sold their sugar in February for an average of €441 per tonne with a price range of €400 to €482 per tonne. In countries with a sugar shortage, prices are considerably higher: €526 per tonne. For the Netherlands and other countries with a production surplus, the average sales price was €429. These levels are about €50 per tonne higher than a year ago.

Futures market rises 20%
Sugar spot prices are slightly higher on the futures markets in London and New York. The refined white sugar quotation (delivery in May) in London stood at €511,50 at the end of March, compared to €424,50 per tonne a month earlier. A price increase of 20,5%. The August contract has also increased considerably in price to €497,20 per tonne.

At the end of March, the Liffe futures market fell again in value to a level of €487 on April 1. This means that the futures market is still at a relatively high price level that has not been seen since March 2017.

More sugar in the EU
The final sugar production for the 2020-2021 season in the EU27 has amounted to 14,56 million tonnes from 1,4 million hectares of beet. For the 2021-2022 season, 1,38 million hectares and a production of 16,08 million tons are assumed. A forecast for the current season has not yet been made. However, the committee notes in its consultation that the area in the EU is decreasing due to the attractive prices of grains. The risk of beet cultivation is greater than that of grains, which means that arable farmers are more likely to make the switch.

The sector is currently talking about a 2% decrease in the area within the EU. This means that beet cultivation has fallen for the fifth year in a row, to 1,35 million hectares. In Western Europe, many sugar beets have already been sown in March. It is unknown to what extent night frost causes damage. In France, the mercury fell to the lowest value since 1947. Growers' organization CGB is talking about several hundred hectares of frost damage. It has also been very cold in Germany.

Impact of war small
The consequences of the war in Ukraine are not directly felt by the sugar sector in terms of production. Although the country grows around 227.000 hectares of sugar beets, it hardly trades with the EU and Russia. This means that market disruption remains limited. However, there are several countries that have banned the import of EU sugar or want to do so. This concerns Moldova, Kyrgyzstan and Algeria. Because the volumes involved are small, the committee does not expect any market disruption.

What does have consequences for the production of refined sugar are the high fuel prices. These ensure that it is lucrative to extract bio-ethanol from beet sugar. The committee is also still taking into account adverse consequences due to new corona outbreaks.

Rising price not sure
Whether the sugar price will rise further depends on the world market. Sugar production (and export) in Brazil is lower due to the aforementioned bio-ethanol market. India and Thailand must fill this gap in the global market. India expects a record production of 26 million tons, 4 million tons more than last year.

The International Sugar Organization ISO has raised the global sugar deficit to 2,294 million tonnes. That was 2,021 million tons. ISO assumes more production worldwide in the current season (+1,48 million tonnes), which will reduce the deficit again in 2021-22. At the same time, consumption is also increasing (+1,11 million tons). As a result, closing stocks decrease. This is especially the case in Brazil. The European ending stock is likely to increase by 2,18 million tonnes. If the sugar sector in the EU continues to underperform, the area may also decrease next season. The sector may then run into problems due to a production shortage to meet its own needs. Whether this will provide a much-needed price boost within the sector remains to be seen.