French farmers are exchanging their sugar beet for rapeseed and barley this year and 75% of the sugar beet in the Netherlands is in the ground. However, both factors have little influence on the listing on the ICE. It is completely under the spell of the price for Brent crude oil and rose to the highest level in five years.
The French sugar beet area this year is reported to be 396.000 hectares. That is a minus of 1,5% compared to last year and even 11,6% below the five-year average. By the way, points the Ministry points out that this estimate was made before the cold period of last week. This could reduce the area of sugar beet even further. In France, sugar beets have mainly been exchanged for rapeseed and barley. The rapeseed area is reported to increase by 18,4% this year to 1,16 million hectares and the barley area in France amounts to 1,18 million. An increase of 4,3% compared to last year.
In the Netherlands, approximately 75% of sugar beets have now been sown, according to figures from Cosun. In the regions of Zeeland Flanders, the Zeeland Islands and Flevoland, more than 90% of the beets are already in the ground. On sandy and valley soils, sowing is slightly behind, mainly because limited manure could be spread. According to the beet growers' organization, the night frost at the beginning of April caused only very limited damage to the young beet plants. "The precipitation preceding the frost contributed to this," Cosun said in a member message.
All in all, the production figures look good. Rabobank expects that - if growth conditions in the European Union are favorable - yields can return to 'normal' levels. Next year that would be 17,7 million tons, an increase of 2,6% compared to last season. Worldwide, the bank expects production growth of 2,2%, with Asia and Brazil also showing positive results. According to the bank, consumption will increase by 0,8%. The combination of the two will create a sugar surplus of 2022 million tons in the 2023/2,5 season. "We have also taken into account a halving of sowing in Ukraine," the bank said in a report.
Sugar price to highest level in five years
Yet those production increases are not enough to calm the price. The quotation for sugar on the Intercontinental Exchange (ICE) closed on Friday, April 8, at €515 per tonne. That is the highest level in five years. The quotation closed on Monday April 11 at €513 per tonne. A slight decrease compared to the closing price before the weekend, but any closing price above €500 per tonne is exceptional. And one week earlier the quotation closed at €491 per tonne. The upward trajectory has therefore clearly been set. There are of course several reasons for the sharp price increase in recent days, but the most important is the price of Brent crude oil. As is known, this is being strongly stimulated by the war in Ukraine.
Brent crude oil prices closed at $13 per barrel on Wednesday, April 104. One week earlier that was $99 per barrel. This rising trend is negative news for the sugar industry. Because the higher oil is priced, the faster Brazilian sugar cane processors choose to produce ethanol instead of sugar for the food industry. Last week we also saw that ethanol continued to win the battle. Figures from Covrig Analytics indicate that this could see Brazil's sugar production fall by 30% in April, to below 1,55 million tonnes. According to the market agency, sugar cane processors will divert 70% of sugar cane to ethanol production this month
The strong Brazilian real also pushes up prices. The price is now at its highest level in two years. This prevents exporters in the country from selling product. Something that is also reflected in Brazilian sugar exports for the first quarter of this year: -22% to 4,5 million tons. The export price averaged $384 per tonne. One year earlier, that was $316 per tonne in the same period. For the whole of 2021, the average export price was $284 per tonne. A higher price is expected this year.