The sugar quote has been climbing for some time and reached new highs last Monday (June 6). After that, the price dropped significantly. In Brazil, sugar production may again be preferred over ethanol.
Various developments worldwide make sugar an extremely expensive raw material at the moment. Last Monday, June 6, the highest point in more than five years was reached at $594,00 per tonne of white sugar on the ICE quotation. This price level was achieved after it became known that India has already exported more than 8,5 million tons of sugar for this season and that this volume may remain the same. Today (June 9) the price is $562,10 on ICE listing.
Last month, India imposed an export ban on sugar up to 10 million tons in total, but the maximum volume does not appear to be exported for the time being. In addition to the export ban, the Indian government is also demanding special export permits for shipments between June 1 and October 31, which will temporarily halt the export of the remaining 1,5 million tons of sugar. Commodity broker Marex calls India's new system for obtaining export licenses slow and cumbersome, meaning the country is unlikely to reach the 10 million tonnes target by October 31. This weighs heavily on the already sky-high sugar quotation.
Sugar beet acreage in Spain is declining sharply
The sugar beet area in Spain is significantly smaller this year due to the lack of precipitation at the beginning of this season and the higher costs of cultivation. As a result, Spanish growers see sugar beet cultivation as a lot less lucrative. According to the daily Diario de Leon, Spain's two sugar factories will see their total surface area drop to 16.200. Last season the area was 21.660 hectares.
Fuel prices Brazil
The production of ethanol in countries such as Brazil has been dramatically increased recently, while that of sugar has been put on the back burner. The reason for this was that sugar cane mills opted for the production of the easier alternative ethanol, because the price of gasoline was still very high. Even now, fuel prices in Brazil are still very high. However, it was announced on June 6 that the Brazilian government is proposing to abolish taxes on fuels to lower prices. As a result, the alternative to gasoline, ethanol, will also decline sharply. The result is that the sugar cane mills can shift production from ethanol back to sugar.
Currently, the price of crude oil is still steadily rising, which means that ethanol production is still popular despite the fact that sugar is at a very high level. Much will depend on what the new price of fuel ends up being after the abolition of excise duty in the country.