European sugar price has reached maximum

Sugar prices in Europe have risen sharply in the past year due to below-average sugar production and the increased sugar price on the world market. With an average of €819 per tonne of white sugar in August, the sales price is 69% higher than a year ago in the same month. However, the sugar price on the European spot market has stabilized in recent months and the average price is even €2 per tonne lower than in July, according to figures from the monthly sugar report of the European Commission (EC). The short-term contracts for sugar, the last of which is known from June, are a lot higher at €978 per tonne. However, only 1,6% of the traded sugar was sold on the basis of short-term contracts.

With an expected sugar production of 15,6 million tons in 2023/24, more than 1 million tons more sugar will be produced than the previous season. The increase is due to the area expansion of beet cultivation, mainly in Northern and Eastern Europe, such as Poland. In Western Europe, the area actually decreased slightly. But the EC also estimates hectare yields to be higher throughout Europe after an erratic harvest last year. But this still leaves a significant gap between the limit of European production and consumption, which is estimated at between 16,5 and 17 million tons. Imports of the sweetener make up that shortage, just as happened last season 2022/23 when a record 2,55 million tonnes were imported. Due to the higher sugar production in Europe, the supply will increase somewhat and less sugar will have to be imported from other parts of the world. This could provide some relief to the heated sugar market after a turbulent year. This will not easily lead to a major price drop, is the expectation of several sugar analysts.

The 2022/23 season ended on September 30. The new 1/2023 season started on October 24.

Sugar price in London takes a big hit
Prices on the sugar futures markets show a very different picture than in mid-September. Then both the London and New York futures markets hit new highs on growing concerns about the availability of sugar in the world. Prices rose due to a shortage of rainfall in Asian countries and a sugar export ban is expected in India due to disappointing cane yields. While the country is one of the world's largest sugar exporters. It led the white sugar contract to more than $760 per tonne in mid-September, or the highest point in more than a dozen years. But the price has now suffered a significant dent and today (October 3) the futures market is trading below the $700 per tonne mark, or a decline of almost 9% compared to two weeks ago.

There are several reasons for this, but it is mainly the Brazilian sugar cane harvest that has reduced concerns about the availability of sugar. The world's largest sugar exporter is heading for record production and continues to achieve above-average production and export figures every month to date. As a result, the supply is increasing in the world, where extra sugar is needed now to meet demand. In the short term, analysts expect that there will still be sufficient sugar available on the world market. Brazil plays a very important role in this with its exports, according to the EC. Another reason for the sharp decline in the futures market is that the US dollar has risen in value against the euro.

The good sugar production in Brazil does not eliminate concerns about the availability of sugar from Asia, and certainly not in the long term. Asian countries, including India and Thailand, have also had relatively little rainfall in recent weeks, which has far from improved sugar cane yields. This year's monsoon rainfall in India was the lowest since 2018, partly due to the weather phenomenon El Niño, which resulted in less precipitation. This makes export restrictions on sugar on this continent likely in the coming months.