Sugar prices on the spot market in Europe continue to rise due to this season's shortages. The shrinking beet cultivation in Europe is also driving up prices. This could have a positive effect on the beet price next season. Worldwide, sugar also continues to increase in price.
Last week, the European Commission once again lowered the forecast for European sugar production to 15 million tons, due to the lower beet yield. Sugar prices in Europe are skyrocketing, partly due to the sugar shortage that the EU is experiencing. The average spot price for white sugar in February 2023 was as much as €804 per tonne, an increase of 81% compared to February 2022. Compared to September 2022, this is an increase of 51%. This means that the prices of the spot market are far above those of the futures market, where prices are also still rising. The futures market in London for white sugar is currently trading at €579 per tonne, more than €220 per tonne lower than on the spot market.
In Europe, prices vary considerably per region due to supply and whether there is a surplus or shortage. The price difference has now become smaller per region due to the entire shortage within Europe. In Western Europe, the average price in February was €788 per tonne and in Southern Europe, the region where the difference in supply and demand is normally the greatest, the price was €894 per tonne of white sugar.
Shrinking cultivation
Sugar prices have gradually increased in 2018 and 2019 after several lean years, but have only really skyrocketed since the beginning of 2022. According to the European Commission, this is mainly due to beet cultivation, which has been under pressure for years and the harvest, which was almost 10% below the five-year average. Another reason for the price increase is the rising costs of sugar refining due to high natural gas prices. These costs are now considerably lower.
Despite the higher balance that beet growers in Europe can count on, this is not nearly enough to maintain the beet area. In the Netherlands and Belgium this is different given the yields in combination with the current price level. Cosun Beet Company recently indicated that it expects that the area will not decrease and may increase, although it remains to be seen how the area will develop due to the new CAP. In France, the United Kingdom, parts of Germany, but also in Poland, some growers seem to have finished cultivation due to the drought, the CAP and the shrinking package of crop protection products. The Commission assumes 'only' a shrinkage of 3% to 1,455 million hectares. Anyone who hears the voices of beet grower groups such as in France would say that the percentage should be higher. For example, the French beet growers' group CMG assumes an area shrinkage of 8% compared to 2022.
Beet price may rise in 2023
The current sugar prices could have a positive effect on the beet price next season. Current prices are currently a lot higher than what was sold for earlier this season. Sowing has just started and nothing can be said about the growing season yet, but with the current sugar shortage and the shrinking beet area, the sugar quotation is receiving a lot of support. In addition, the forecast is that the sugar price in Europe will not show any signs of decline in the coming months. The latest developments in the sugar market on other continents also have an upward effect on prices. Wildcard India, one of the world's largest sugar exporters, may export only half of what the country normally exports in a season. Brazil, the world's largest sugar exporter, expects a good sugar cane harvest, but lower than previously expected.
Europe will change from sugar exporter to importer in the coming years. This year it is expected that 33% more will be imported to Europe than the five-year average, which amounts to 2 million tons. To date, imports are far behind and, according to the European Commission, amount to only 600.000 tons. In recent years this has been at least 1 million tons of sugar.