Mixed prospects for the European sugar market

Following on from last year, this growing season is also far from ideal for beet cultivation in Europe. The heavy rainfall has caused significant delays in sowing in Western Europe and water damage also occurs regularly. For example, a few percent still had to be sown in the southeast at the beginning of June, according to Cosun Beet Company. Sowing seeds in countries around us was also quite a challenge. Sugar producer Nordzucker reports that sowing was very late in the Scandinavian countries and that reasonable progress was only made in Sweden and Denmark in May. The beet growers in Poland and Eastern Europe seem to be doing a lot better with the weather, where on average sowing could be done on time.

There are no clear estimates of the 2024/25 beet area in Europe (yet), besides some expectations from sugar producers and the European Commission (EC), with the latter seeing an area increase of 2% thanks to improved sugar market prices. This brings the area expected to 1.495 million hectares. However, that limited increase seems to have quickly disappeared with the weather of recent weeks and the damage it has caused, regardless of other factors in Europe such as the yellowing virus that is cutting through tonnages in France. This is also confirmed by the May edition of the JRC-MARS Bulletin, which states that in addition to water damage, insect pest pressure also causes damage in various parts of Europe.

European sugar prices under pressure
Conditions in European fields have little effect on global sugar prices given Europe's limited sugar import and export volumes and, after all, European sugar remains much more expensive than world market prices. In addition, a lot can change in the coming months with beet cultivation. According to figures from the European Commission, European sugar prices are falling, but this is happening slowly. The average sales price for sugar in April 2024 was €831 per tonne of white sugar, while in January this year it was still €853 per tonne. The price differences between the regions into which Europe is divided by the EC are becoming smaller. The average price based on short-term contracts averages €737 per tonne and has already fallen considerably compared to the almost €1.000 per tonne paid at the beginning of 2023.

An important factor for the falling European sugar prices is the improved sugar production in 2023/24 compared to the previous season, although the total European production is not entirely satisfactory due to the wet autumn and a lower sugar content than usual. Another factor that influences the European sugar price is Ukrainian sugar, which enters Europe at more competitive prices. According to figures from TAXUD, the European Commission's Directorate General for Taxation and Customs Union, the average import price for sugar from Ukraine at the borders in May 2024 was €641 per tonne, an amount with which it is not competitive. With volumes of more than 60.000 tons of sugar per month, exports have increased rapidly in recent times, but have now decreased considerably. For example, exports in May were still around 20.000 tons of sugar. In total, according to the EC, there is 394.000 tons this season (September/October) 2023/2024.

The expectation today is that Ukrainian sugar imports will not resume until the new calendar year 2025. Taras Vysotskiy, Ukraine's Minister of Agriculture in Ukraine, recently reported that the government will formally halt sugar exports to the European Union for the rest of this year as its quota for the bloc has been reached. This follows the plan to suspend tariffs on Ukrainian agricultural exports in April, which placed limits on the volumes of several sensitive products, including sugar, that can enter Europe annually before an 'emergency brake' is activated. From 2025, this quantity will then be limited to a maximum of 109.438 tonnes under the "emergency brake" and will run until June 4, 2025. With these smaller volumes, the impact of Ukrainian sugar on the European sugar market is expected to further decrease.

Sugar futures markets under pressure
As in previous weeks, quotations on the sugar futures markets remain under pressure. The white sugar contract in London opened on Tuesday morning, June 11, at $545 per tonne. The main reason remains the Brazilian sugar cane harvest, which, according to various Brazilian agencies such as the well-known DATAGRO, is in better shape than previously expected. This should lead to higher sugar production. In addition, sugar production in the country has started well and the country's sugar exports are above average. The Brazilian currency Real has also continued to decline in value in recent months. Today, 1 Brazilian real is equal to $0,19, while in January it was $0,21. The relatively weak Brazilian real is not exactly a good development for the country's overall economy and is affecting Brazil's sugar trade. It could cause Brazilian producers to try to sell their sugar abroad in bulk, analysts write. 

The monsoon rains are starting in India and this has a positive influence on sugar cane growth in the country that is the second largest sugar producer in the world. In general, Asian countries are doing better in terms of sugar cane cultivation than last season, several sugar analysts write. 

But not all noise in the market puts pressure on prices. India's export ban may be extended until further notice. A message from the international sugar organization ISO from the beginning of this week may increase the price slightly. Last February, the ISO estimated the world sugar deficit for 2023/24 at 0,69 million tonnes. Yesterday this was adjusted considerably upwards to a deficit of 2,95 million tons. The production forecast was revised down by 0,48 million tonnes to 179,27 million tonnes. On the other hand, the consumption forecast is estimated 1,79 million tons higher at 182,22 million tons.