Sugar prices have been on the rise over the past week. The share price hitched a ride with rising oil prices. When they fell on Wednesday, the sugar price followed.
Sugar cane is an important raw material for ethanol, the production of which becomes more attractive as oil becomes more expensive. Now that oil has become cheaper in recent days, sugar is also becoming cheaper. However, there are plenty of signals that indicate that the sugar price may soon rise again. One of those signals comes from India.
Export restriction
India will not widen export restrictions on sugar, government and industry officials told Reuters on Thursday. This also puts an end to rumors that the world's largest sugar producer would allow a second shipment overseas.
India, which is the world's second largest sugar exporter after Brazil, exported 11 million tons of sugar last season. The counter for this season currently stands at 6,1 million tons and the government now seems to be putting the brakes on. Due to high inflation at the start of the season in October, exports were restricted at the time. However, the Indian government also said it would allow a second wave of exports once there was more clarity about local production.
Sugar mills have already signed contracts to export about 5,6 million tons of sugar. Producers, traders and the industry hoped that the government would allow the export of an additional 2 to 4 million tons of sugar. But a reduction in expected sugar production has permanently evaporated the prospect of additional exports during the 2022/23 season.
Trading houses initially expected India to allow exports of about 8 to 9 million tons of sugar, but bad weather caught the industry by surprise. Initially, sugar production would amount to 36,5 million tons, far exceeding local demand of 27,5 million tons. Now the production expectation has been lowered to 34,4 million tons.
Moist soil
Although India does not seem to be exporting sugar anymore this season, there is good news from Brazil. The agricultural land in Brazil where coffee and sugar cane grows is currently the moistest in seven years. This ensures a larger sugar cane harvest and therefore higher sugar and ethanol production. According to agricultural weather agency Rural Clima, current conditions are very favorable for the growth of sugar cane with typical summer weather, with constant rain interrupted by sun.
The Brazilian sugar cane harvest starts a little earlier than normal this year. This is because there is still some sugar cane from last year in the field. Heavy rainfall in December, which is why the groundwater level is now so high, meant that harvesting could not take place at the time.
British monarch
Farmers Weekly reports that the frost insurance that protects British beet farmers against frost damage has come into effect after a period of frost some time ago. British Sugar and the British beet growers' association NFU Sugars have confirmed that frost insurance for 2022 has come into effect after another week of frost with temperatures dipping below freezing for five days in a row. Frost damage was previously reported at the end of December and the recent wave has caused even more damage.
The frost has caused many sugar beet growers to throw away a significant part of their harvest. It was previously announced that heavy frost in Belgium had also caused damage. The insurance compensates farmers for damage suffered if they can no longer deliver their crops to processors due to frost damage.
Futures
The sugar price on the ICE in London rose by 1,4% from $544 per tonne to $551,60. The price peaked on Tuesday and has been falling ever since. The increase in sugar prices in New York was more limited, rising by 0,86% from $433,22 per tonne to $436,96 per tonne. That price also peaked on Tuesday.