Persistent concerns about the availability of sugar are leading to a significant recovery in the futures market. This after the sharp decline at the beginning of October. The European beet harvest is now continuing 'normally'. In addition, with an above-average sugar beet yield, Ukraine can supply Europe with extra sugar next year.
The white sugar contract on the London futures market (ICE) has fallen sharply since the end of September, after the futures market previously reached its highest point in more than 12 years. The decline was partly due to above-average sugar production in Brazil. Brazilian sugar industry group UNICA confirmed above-average sugar production by announcing that sugar production was 23% higher year-on-year.
But now the cards have been shuffled differently. High amounts of precipitation in the South American country are putting a brake on the sugar cane harvest, which has somewhat tempered high expectations of the robust supply. As a result, concerns about the already heated sugar market are increasing again.
The white sugar contract in London is trading at $17 per tonne on Tuesday morning (October 735). This means it is already $55 per tonne or 8% higher than the lowest point at the beginning of October. The increase has mainly started since last week. The raw sugar futures market in New York shows a similar bullish pattern with slightly larger gains.
Not only sugar production in Brazil, but also the increased crude oil price leads to an increase in the sugar price. In addition, the availability of sugar is under pressure because India and other Asian countries are producing a below-average sugar volume this season. This is due to disappointing reed yields, partly due to the El Niño weather phenomenon. It is almost certain that India will restrict sugar exports or impose tariffs. Just like the country did before with various grains and onions, the harvest of which was also disappointing. In the worst case, the export of the sweetener will be completely banned. Even though India is one of the world's largest sugar exporters.
Ukrainian sugar also in Europe in 2024
In Europe, the expected sugar production of 15,6 million is much higher than the 14,5 million tons of last season, but above-average sugar imports will also be needed next season to meet consumption. Brazil has always been the largest exporter to the EU with more than a third, but last year Ukraine also had a significant share with 16%. In total, the EU imported 400.000 tons of sugar from Ukraine. Previously, sugar from Ukraine was almost negligible in the total in Europe.
Because customs duties in the EU on various Ukrainian agricultural products (including sugar) have been lifted, sugar imports from Ukraine have accelerated. The decision that customs duties have been lifted will also apply next year and sugar will be able to be imported from Ukraine without duties. Given that Ukraine has one of its largest sugar beet harvests in several years, even more sugar is expected from the country next year. Commodity trader Czarnikow expects at least 450.000 tons to be imported. In total, Ukraine expects a sugar production of more than 1,6 million tons, significantly higher than last year when it produced 1,2 million tons.
France estimates slightly higher beet harvest
The French beet harvest is continuing smoothly under the current conditions. Based on growing conditions and weather in recent weeks, the French Ministry of Agriculture has slightly increased the beet harvest to 31,3 million tons of sugar beets. This means that the volume of beets is only 0,7% lower than last year. This despite the fact that 8% fewer beets were sown this spring. However, the volume is still 7,9% lower than the five-year average. An explanation from the French ministry states that the first harvested beets show a lower sugar content than normal.