Sugar prices in both London and New York are reaching the ceiling in the market. This is partly due to production setbacks, in other words: the growing season for both sugar cane and beet is not all right. But developments in the energy market also support sugar.
In the international sugar trade, there are concerns about the production potential of sugar cane in India and Thailand. In El Niño years, there is usually less rain in these countries, which translates into lower sugar yields. A relatively high oil price makes it attractive for Brazilian sugar producers to process more sugar cane into ethanol. In addition, the Brazilian government is considering increasing the blending percentage of ethanol in gasoline from 27% to 30%.
Sugar beets in Europe are not doing well, as can be seen from the European Commission's Mars bulletin published yesterday. A late, cold and wet start, followed by drought, did not do the beets any good. The European average for beet yield is forecast at 73,3 tons per hectare. For the Netherlands, the Mars Institute calculates a harvest of 82,0 tons per hectare. The highest yield is for Spain with 84,2 tons per hectare and the lowest for Romania with a predicted harvest of 37,9 tons per hectare. These are all returns around the five-year average.
Sugar instead of sweetener
The UN World Health Organization (WHO) provided a small surprise that hit the sugar market. The WHO placed the sweetener aspartame on the list of possible carcinogens. Aspartame is used as a sugar substitute in soft drinks and food. The sweetener is safe for consumer use as long as the recommended daily allowance is not exceeded. Still, the news could increase demand for sugar. This effect is of course not immediately reflected in the sugar market, but it does strengthen confidence in the market.
Demand for sugar is relatively good on the physical world market. A sign of this, according to some experts, is an order from Egypt. The country is said to have purchased 50.000 tons of sugar for delivery in September/October. That purchase gave the market an extra boost last week. Sugar prices on the futures markets in both London and New York are making significant progress. We are not yet at the records set at the end of April, but the peak of mid-June is getting very close again, especially in London.