International sugar market starts 2023 on a down note

Sugar on the Liffe closed 0,8% lower yesterday at $547,50 per tonne. The New York listing showed a similar decline of 0,81% compared to the closing price a day earlier.

According to analysts, the downward trend on the sugar market is closely related to the falling price of crude oil. This makes it more attractive for sugar cane processors to process sugar cane into white sugar instead of ethanol for use as or in fuel. The Brazilian ethanol market was also surprised this week by the new president Lula. He has decided to extend the exemption from federal taxes on fuel. The sugar and ethanol industry and international sugar traders were counting on taxes on fuel and ethanol to be levied again after statements by the Minister of Finance last week.

Attack on the environment
The granting of the tax exemption will be detrimental to Brazilian ethanol producers, experts say. Typically, extra taxes are levied on gasoline and less on ethanol, making ethanol more attractive from a price point of view. The sugar and ethanol industry association Unica says the new Brazilian government is complicit in the environmental attack launched under former President Javier Bolsonaro. According to Unica, the tax exemption also contradicts Lula's commitments at the UN climate summit in November. Brazil is one of the largest suppliers of sugar on the European market. In October, about a third of Europe's sugar imports came from the country in South America, European Commission data show.

Opinions differ as to whether the decline in sugar prices will continue. Good sugar cane harvests are forecast for the major players on the world market, Brazil, India and Thailand. This indicates that a further decline in sugar prices is in the offing. Whether this also happens in the EU remains to be seen. The European Commission assumes smaller European sugar production and final stocks for the 2022/23 season. This could support the sugar price within the EU.