Improved sugar production forecasts in various parts of the world are putting sugar prices in the red. This is now at its lowest point in more than six months. Western Europe is one of the areas where sugar production may have difficulty reaching the long-term average in the coming season.
The sugar quotations in London and New York have actually been under pressure to a greater or lesser extent since last winter. Then both the New York and London futures markets reached their highest point, with the London futures still above $740 per tonne of white sugar in September and November. Since then, the prices have fallen considerably and occasionally climbed out of a trough, only to end up lower again. This is mainly due to top production in Brazil, which resulted in a lot of supply on the world market.
At the end of June the listing in London rose sharply. Anyone who looks again now will see that less than a month later the lowest point in a year and a half has been reached. Tuesday afternoon, July 23, the board read $526,10 per ton. The decline is partly the result of improved production prospects in Asian countries. There, the weather phenomenon El Niño gives way to El Niña, which brings more precipitation to that part of the world instead of drought. Sugar production in Brazil also remains above average, as figures from the Brazilian sugar association Unica show about sugar production progress.
Brazil is off to a good start again
With a record production of well over 40 million tons of sugar (and export volumes that also broke records), Brazil provided a lot of supply to the world market last season. The South American country has also gotten off to a good start in the new processing season. Sugar production has already reached 14,2 million tons since April, or 16% more than in the same period last year. Also, 49,9% of the sugar cane that is processed is allocated to sugar production. The other 50,1% goes to bio-ethanol. That percentage is much higher than in other years, and even higher than last processing season. In other years, about 42% to 45% of use was allocated to sugar production. Analysts do state that last year's record production will not be achieved because growing conditions were less than last year. However, the area has increased in recent years. This is due to the improved profitability of cultivation due to the increased sugar prices.
Exports are also off to a good start in Brazil this season. In other years, the country's sugar exports are quite quiet, but volumes remain at a good level for this time of year. This is also because the country still has large stocks from last season. According to data from Brazilian shipping company Cargonave, Brazilian sugar exports increased by 50% in the first 6 months of 2024 to 15,2 million tons. The largest customer was Indonesia.
Sugar surplus continues to increase
As previously written, the sugar futures market is also under pressure due to the improved sugar forecasts in Asia. There, the weather phenomenon La Niña will give way to El Niño in the coming months, which means that more precipitation is expected in Asia, which is favorable for sugar cane cultivation. The British market agency Czarnikow, a well-known party in the sugar industry, also increased their forecast for global sugar production for this reason. They see that various regions in the world are producing more than last year, such as Thailand, Pakistan and India. These are all major sugar producers compared to other countries. They increase their previous world sugar surplus from 5,6 to 8,8 million tons of sugar. This makes the global production surplus the highest since the 2017/2018 season. Although the amount of the sugar surplus or shortage differs from other market agencies, they agree that supply is increasing and this season there is a sugar surplus instead of a shortage. The USDA also confirmed this in the latest sugar report.
Sugar beet yield in Europe adjusted downwards
In Europe, the sugar beet crop is picking up somewhat after a very wet start, but the backlog is not (yet) being made up according to the European Crop Monitor Service of the European Commission. The July report shows that the average sugar beet yield has been adjusted downwards by more than 1% in Europe to 73,4 tonnes per hectare. A month earlier this was 74,4 tons of beets per hectare. Normally they also provide a yield forecast per country, but that is missing this time. However, Europe's current yield forecast is in line with the five-year average.
Compared to the rest of the world, Europe, with an annual sugar production of 15 to 18 million tons of sugar, fulfills a relatively small share. In addition, the EU only exports a small part and imports the same amount. Last season, more was imported due to the below-average sugar production. As a result, what happens in the EU only affects the world sugar market to a certain extent.