Concerns about global sugar supplies and production have increased further due to India's possible export restrictions and the El Niño events. Sugar on the London futures market has even risen to a 12-year high. In Europe, beet production remains substandard, but that is not due to the carrot yields.
Sugar quotations on the futures markets have been on the rise since the second half of August due to El Niño troubles and the expected disappointing sugar cane yields in Asia, including India. Significantly lower monsoon rainfall in key growing areas in India, such as Maharashtra and Karnataka, which together account for as much as 45% of the country's total sugar production, is the reason for a lower harvest and a most likely export ban of the sweetener. Concerns about the possible impact of the weather phenomenon El Niño do not improve the prospects. The weather phenomenon results in less precipitation in various parts of Asia, which can lead to the desiccation of crops, including sugar cane. The disappointing yields will lead to lower sugar production and will only put further pressure on the availability of sugar.
Highest rating in 12 years
The increased concerns about the availability of sugar are clearly reflected in the sugar quotations. The white sugar contract in London has fluctuated somewhat up and down in recent weeks, but has now been trading above its highest point in more than 12 years for several days and closed yesterday (Monday, September 4) at $735 per tonne. That is almost 8% higher than the average price of recent weeks, which is about $680 per tonne. In recent weeks, $700 appeared to be the upper limit. Now the listing is well past this. The raw sugar contract in New York has also risen sharply.
India export ban
It has not yet been officially confirmed by the Indian government, but it seems very likely that India will restrict the export of the sweetener due to disappointing sugar cane yields. After all, the country previously did this for the same reason with wheat and recently with several types of rice. To protect domestic prices, India wants to keep enough sugar within its borders. Food inflation in the country has risen sharply in recent months and keeping sugar prices in check is important to suppress this inflation.
With an export volume of 11,1 million tons of sugar in the 2021/2022 season and 6,1 million tons in 2022/23, it is clear that this season's total export ban will significantly reduce global supply. While concerns about the tight availability of sugar have increased considerably in various parts of the world. This can cause complications, especially for other Asian countries such as Bangladesh and Indonesia, which normally purchase a large volume of Indian sugar. The gap that India leaves behind with an export ban is large and cannot simply be filled by other countries.
The Brazilian sugar cane harvest, which is heading for record production, has also failed to alleviate global concerns about supply. Various sugar mills, production regions and UNICA (Organization of Brazilian Sugar Producers) have been reporting excellent and above-average production figures for months, making it seem realistic that a total of more than 40 million tons of sugar can be produced. It is obvious that this will allow more sugar to be exported. This is currently happening, also in view of the current export figures, which are higher than in other years. However, this appears to be insufficient to reduce concerns about availability. In fact, sugar quotations have only increased in recent months.
European prices have risen again
In Europe, too, the average price for white sugar is still rising every month, although most of the stretch has been exhausted. This is evident from the European Commission's monthly sugar report. The average price for white sugar in Europe increased by €3 to €817 per tonne in June compared to a month earlier. A year ago (June 2022), the price was much lower at €453 per tonne, which means an increase of 80% over a year. Prices differ per region in Europe, with the highest price in the south at €897 per tonne and the lowest in Western Europe with an average of €806 per tonne.
Given the current availability and production expectations for the near future, both the European and international sugar prices appear to be in good shape. Prices remain relatively volatile, but analysts see little sign of a serious price decline in the short term. Just like in 2022/2023, European production is heading for a clear shortage again next season. As a result, a larger volume will once again have to be imported. The total import for the current season amounts to almost 18 million tons of sugar until August 2,4. In the past two years this was around 2 million tons. In previous years, imports were at a comparable level or much lower.
Lower sugar content of beets
Sugar beet production is expected to be better than the last season, which was plagued by heat and drought. This season is not going smoothly either, but due to more than sufficient rainfall in important growing areas, the beets have recovered considerably from their late, slow start, according to Rabobank's monthly report on agricultural raw materials. This shows that the sugar levels are lower this year, but the root yields probably compensate for this. A smaller area is the reason why total sugar production is lower than in recent years. Making estimates about total production is difficult, but the European Commission estimates that sugar production will amount to 15,5 million tons next season, 1 million more than 2022/2023.