Sugar market remains overcrowded, but EU does not intervene

There will be an oversupply in the European and global sugar market for the time being, ABN Amro expects in a recently published report. Although the sector has been struggling with low prices for some time, the European Commission will not intervene, according to European Commissioner Phil Hogan. What factors play a role in the sugar market?

Brazil in particular plays a positive role in the global sugar market. For a long time, the Latin American country was the largest sugar producer. But for the Brazilians, the production of ethanol from sugar is more lucrative. As a result, sugar production in the country has fallen by 19% in the past year, writes ABN Amro. On the other hand, China's production increased by 10% in the first half of 2019. However, the sugar cane and sugar beet harvest in China is threatened by a pest insect (armyworm).

Large offer from India
An apparently positive factor in the current sugar market is that the largest sugar producer India will produce less sugar this year. This is because the country has fallen significantly less rain. As a result, the yield is expected to be about 10% lower. The negative aspect of this story is that it has little impact on the market. India still has large stocks of sugar. As a result, sugar exports from India are even expected to double in 2019/2020.

Sugar production in Europe will also increase slightly this year, ABN Amro expects. On the other hand, the global demand for sugar is growing only slowly. Over the past 6 years, consumption grew by about 1 to 2%. The increase in consumption is mainly due to Asia, while little growth is expected in Europe and North America. All in all, ABN Amro expects that the growth in supply cannot be kept up with demand. The bank therefore assumes a stable sugar price for 2019 and 2020.

do not intervene
Despite the clear oversupply, European Commissioner Hogan stated last week that intervention in the sugar market is not necessary. He believes the sugar market is still adjusting to the no-quota era. He said this in response to a report showing that the farmer's position has weakened after the abolition of the sugar quota. Among other things, the report establishing producer organisations recommended.

Anne-Jan Doorn

Anne Jan Doorn is an arable expert at Boerenbusiness. He writes about the various arable farming markets and also focuses on the land and energy market.

aj.doorn@boerenbusiness. Nl

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