Where the sugar market was unable to choose a clear direction in recent weeks, that choice was made this week. The quotation moves upwards in one straight line. The sharply increased energy prices, as a result of the war between Ukraine and Russia, play the largest role in this. Furthermore, the Ukrainian Sugar Producers Association calls on the International Sugar Organization to suspend cooperation with Russia.
The sugar price had recent weeks had difficulty choosing a clear direction and so it moved alternately up and down. The upward moves were largely caused by high energy prices, especially the extreme rise in Brent oil. The downward moves were driven by investors' search for safe havens. Just before the Russian invasion of Russia, the futures market price for sugar stood at €436 per tonne. At the end of the first week of the war that was €438 per ton. Last week we kicked off with a quotation of €443 per tonne. Since then, market panic has increased and sugar prices have skyrocketed.
On Friday, March 4, the sugar quotation closed at €484 per tonne. An increase of no less than €41 per tonne in five days. The week kicked off on Monday, March 7, with a quotation of €490 per tonne. And on Tuesday, March 8, the quotation rose to €492 per tonne. That is the highest level since 2017. High energy prices are entirely responsible for the price increase, analysts say. In fact, the fact that there is some doubt whether Brazilian sugar mills prefer ethanol to sugar production does not stop prices from moving upward. This doubt arose when the Brazilian government announced its intention to regulate domestic fuel prices.
Another somewhat bearish aspect for the sugar market is that the global sugar shortage is expected to be smaller than previously thought. Market agency StoneX has increased its estimate for world sugar yields to 33,2 million tonnes (for the season running from October to September). That is 5% higher than January's expectation. The increase in production is mainly due to India. This reduces the sugar shortage from 1,9 million tons to 1,1 million tons. The market agency also sees that Brazilian sugar cane processors prefer sugar instead of ethanol. However, the fluctuations between them remain volatile.
Suspend cooperation
Then there is other news on the sugar market. Ukrtsukor, the national association for sugar producers in Ukraine, has called on the International Sugar Organization (ISO) to suspend cooperation with Russia. In addition, if it were up to the Ukrainian sugar producers, the Russians would no longer be allowed to perform executive tasks within the International Sugar Organization. "In these difficult times, a bloody war is raging on our land. Normally we would now be conducting field work and preparing for the sugar beet sowing campaign," Ukrtsukor members said in a message to the sugar association.