Good harvests worldwide
Sugar price to lowest level in 2,5 years
The abundant harvest of sugar cane worldwide is putting renewed pressure on international sugar prices, which have fallen to the lowest price level in 2,5 years. Premiums for the refining of raw sugar have also decreased.
The May contract for white sugar (the Liffe in London) stood at €290 per tonne in mid-March. As a result, prices have fallen by €1 in 5,50 month. The August contract lost slightly more at over €8. It now stands at €286 per tonne. In New York, the futures market quoted €230 per tonne for raw sugar (the March contract), representing a decrease of €13.
The May contract is currently at €245. The refining premium fell to $73 per tonne. The International Sugar Organization (ISO) expects a world harvest of almost 2017 million tons for the 2018/180 season. With consumption of 175 million tons, stocks rise to 91 million tons of sugar.
(Text continues below chart)
The white sugar futures contract continues to lose ground in London.
Yield of sugar cane
The reason for the reductions is the good harvests of sugar cane. India expects a harvest of 29,5 million tons of sugar, of which 4,2 million tons can be exported. The country has reduced the export tax from 20% to 0%. However, due to the artificially high prices in the country, the price difference with the world market is enormous. Transport and export must therefore be subsidized to make it attractive. An export volume of 10 million tons of sugar is expected for Thailand.
In Brazil, the sugar cane harvest is estimated at 590 million tons (for the 2017/2018 season). In the coming season, it will decrease slightly with 585 million tons. Only 40% is processed into sugar. The vast majority is used for the production of ethanol. Low sugar prices help with this, as does government policy to reduce the use of fossil fuels.
Significantly more exports
The European Union (EU) exported 1,64 million tons of sugar between October and March, more than 1,1 million tons more than in the same period last season (when the quota was still in place). Under the old legislation, only 1,3 million tons could be exported per season. It is expected that subsequent information will lead to a further increase in the figures.
The volume of imports decreased in the same period to 594.000 tons. Last season that was still 1,2 million tons, although these figures are also supplemented with additional information. What is striking is the large share from South Africa, where 30% of the imported sugar comes from.
The free stock of beet sugar in Europe has increased considerably; from 9,5 million to 15 million tons. In addition, stocks were significantly higher on 31 January 2017, as a result of 4,4 million tonnes of non-quota sugar. This is partly exported and partly processed into ethanol.
Smaller surcharge
The selling prices of European sugar producers are still considerably higher than on the world market. Yet the premium continues to shrink. In January, the average price fell by €26 per tonne, to €374 on average. By comparison, in London white sugar was worth €291. For much of 2017, the EU price was always around €500, after which a sharp correction was made in September.
Niels van der Boom
© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.