Despite the global sugar surplus that is expected next season, sugar prices remain at a high level. Europe is heading for meager sugar production. The FAO sugar price index has now reached its highest point in six years.
Global sugar prices have risen enormously since last year and in Europe prices rose even faster. This has everything to do with the higher imports needed this season to supply Europe with sufficient sugar, as a result of the meager European sugar production of 15,5 million tons in 2022/23. On the London futures market, the white sugar contract continues to make moves upwards and currently appears to be bottoming at $580 per tonne. The sugar price is much higher on the European spot market. In addition, the price varies considerably per region, depending on the scarcity of the sweetener.
Sugar surplus
For the coming 2023/24 season, various sugar groups and trading companies expect higher sugar production than consumption. This is mainly due to the good harvests in Thailand and Brazil, which expects the second highest sugar cane harvest ever. Sugar trading company Czarnikow therefore expects a global surplus of 4,8 million tons of sugar. But given the current supply and demand at a global level, this appears to be insufficient to ensure smooth export flows.
A big player on the global sugar market that is causing a lot of commotion this year is the second largest exporter India. The country imposed an export quota on sugar to protect the domestic market. As a result, other countries have to import their sugar from somewhere else. Sugar production is currently in full swing in India and it appears that it will be less high than previously expected, reports the Indian Sugar Mills Association (ISMA).
Sugar production in India has been under scrutiny for some time because high production makes more sugar available for export. Production is slightly behind compared to last season. This is partly because more sugar cane is being converted into ethanol this season. Currently, an export quota of up to 5 million tons of sugar still applies.
Poor beet harvest
The sugar beets still have to be sown, but it is certain that Europe is heading for meager sugar production in 2023/24. Commodity credit rating agency S&P Global Commodity Insights explains that Europe, together with the United Kingdom, produces only 16,8 million tons of sugar, citing France's pesticide ban and challenging cultivation. This means that consumption and production are probably proportionate to each other in Europe. However, Europe normally also exports approximately 1 million tons of sugar, which creates a negative balance. This has the effect of pushing up prices.
Sugar price index rising
The lower exports expected in India in the already demanding world market are clearly reflected in the figures of the FAO sugar price index. The index averaged 124,9 points in February, an increase of 8,1 points (6,9%) compared to January, reaching its highest level since February 2017. Falling crude oil prices are putting pressure on price increases
Sugar quotation stable
Sugar quotes are generally stable on both the New York and London futures markets. The price is strongly supported by the high global demand for the sweetener, while exports are meagre. The falling crude oil price is putting pressure on sugar prices. For example, last Monday, March 20, both futures markets closed approximately 1% lower. When oil prices fall, converting sugar cane into ethanol is less lucrative than sugar, causing factories in Brazil to produce more sugar again. At the time of writing (Tuesday, March 21), the London futures market is trading at $587,70 per tonne of white sugar. The New York futures market is trading at $20,80 cents per pound of raw sugar.
{{dataviewSnapshot(48_1679400724)}}