Sugar prices seem to be on hold. Once again, concerns about tighter supply are increasing and prices are rising. In addition, the wet spring is causing unrest about sugar production for the coming season.
The sugar market in Europe has been showing the same picture for months: price increases with every now and then a small pause. The futures market in London is now trading above $700 per tonne of white sugar and the futures market in New York is even at its highest point in more than eleven years. White sugar even costs well over €800 per tonne on the spot market in Europe. This even varies per region, with prices in Southern Europe even approaching €1.000 per tonne. The UN Food and Agriculture Organization (FAO) reported last month that commodity prices for sugar are at the highest level since October 2016.
The conclusion of the May contract has caused a sharp increase on the futures market in New York because sugar traders have to buy additional contracts to hedge their positions. The quotation has now fallen slightly because there is new supply on the futures market due to the start of the new contract.
Brazil is not taking the pressure off
Sugar prices have risen further in recent times due to increasing concerns about supplies and disappointing production worldwide. At the beginning of April, the world's largest sugar producer India turned the global sugar market upside down by significantly lower sugar production and production in other Asian countries is also lower than expected. This puts further pressure on the already scarce supply in the world. In the short term, it was expected that Brazil, the world's largest exporter, would provide some peace and possibly a price drop, but that does not seem to be the case. The sugar cane harvest, which is about to begin, is proceeding extremely slowly due to excessive rainfall and yields appear to be less good than previously expected. In addition, concerns about supply and tighter inventories appear to prevail.
Due to the disappointing sugar production in Europe last season, prices have already risen considerably. However, the increased prices on the global sugar market are also felt in Europe, because Europe is importing more this year. It is estimated that more than 2 million tons of sugar will have to be imported into Europe this year and hardly anything will be exported. In other seasons, Europe exported more than it imported. Given the shrinking beet area in combination with drought problems, Europe always seems to import more than it exports in the coming years. So far, 1,4 million tons have been imported, while last year the counter stood at 'only' 800.000 tons until mid-April. Brazil is the largest supplier of sugar with 41%, followed by Ukraine with 18%.
Sowing has been substandard so far
European sugar production for this season (2023/24) is now also being looked at. The fact is that the area is again decreasing by several percent, despite the expected higher returns from beet cultivation. This only further supports the current price level of the raw material. Spring does not make beet cultivation any better. Not only in the Netherlands but also other countries in Western Europe have had relatively cold and rainy conditions.
More than 50% has now been sown in the Netherlands and that percentage is expected to increase rapidly this week. In France and Belgium, sowing is also lagging behind compared to other years. Reasonable catch-up has been made in Germany, as reported in the April edition of the European Commission's JRC Mars bulletin. In Poland, one of the largest sugar producers in Europe, the sowing season went well, but the crop is progressing very slowly due to low temperatures and rainy conditions.