Germany expects significant increase in sugar production

Sugar production in Germany is expected to reach 4,77 million tonnes in the upcoming 2024/25 season. This was reported yesterday (2 September) by the German sugar association WVZ in the first harvest forecast of the season. Production is significantly higher than last season, at over 13%, when 4,22 million tonnes of sugar were produced, according to the association. Production is also higher than the five-year average of 4,21 million tonnes.

The significant increase in production can be partly explained by an increase in the sugar beet area. This rose from approximately 364.500 to 385.600 hectares, or an increase of 5,7%. On the other hand, the increase in production can be explained by an average sugar content and a good yield thanks to the high humidity this growing season and sufficient sunshine, as the association explains using test samples from the field. They estimate the yield at 81,9 tonnes of beets per hectare, 12% more than the five-year average in Germany. The sugar content is now estimated at 17,2%. Nevertheless, the growing season did not go smoothly and has been challenging so far. Sometimes sowing was late due to the wet spring and the infection pressure of leaf diseases was also high.

Improved sugar production
Sugar prices in Europe, but also in the rest of the world, have been under pressure for some time now. This is clearly visible in the sugar quotation in London, where the white sugar contract almost touched the $500 per tonne level last month. Improved production expectations are one of the reasons. For example, the sugar cane fields in Asia are in much better shape than last season thanks to favourable growing conditions, which means that more sugar can be produced. And on a global scale, production in that region is much larger and therefore has more influence. Incidentally, the Indian Sugar Industry Group (ISMA) announced that it is no longer necessary to maintain the export restrictions on the sweetener. In other parts of the world, the signals are also green as far as sugar production is concerned. In Europe, sugar beets are at an average level according to yield estimates from the European Commission and the Joint Research Centre. In addition, there is area expansion in various countries, such as Germany described above. According to the European Commission, various Member States sowed later, but there were then favourable growing conditions, which allowed beets to develop favourably. The Netherlands appears to have suffered the most from sugar beet cultivation.

Drought Brazil
In Brazil, on the other hand, production and expectations are going completely the other way. The country is by far the largest sugar producer and exporter in the world and therefore has a major influence on global sugar prices. The production season and the sugar cane harvest started smoothly there and even exceeded the record year of last season in terms of production. However, according to the latest figures from the Brazilian industry association Unica, production is declining somewhat in August. This had already been predicted, but in combination with the ongoing drought, production may decline more quickly than previously expected.

Fire in Brazilian sugar cane plantations
In some regions it has been too dry for several months, reports Unica. Various sugar traders and producers indicate that sugar cane cultivation is suffering and that this will not only affect the current season but also the 2025/26 season. In addition, the drought has led to enormous fires in Brazil's most important production region. Very large areas of sugar cane have been lost. Estimates of the lost area vary and the exact damage cannot yet be determined, but according to sugar cane growers' association Orplana, 80.000 hectares have been burned, reports news agency Reuters. That is more than 1% of the sugar cane area in the largest production region. The ongoing drought is also leading to lower sugar cane yields elsewhere in the region.

For that reason, sugar prices in London and New York rose sharply at the end of August. The raw sugar contract in New York even rose by more than 10% to $438 per tonne. The white sugar contract in London rose less sharply by 6% and ended August at $557 per tonne. In the meantime, the white sugar contract has fallen again somewhat and is listed at $544 per tonne on Tuesday afternoon at the time of writing.

Cosun sees difficult sugar market
Cosun Beet Company also explains that the sugar market is developing differently than previously thought and must therefore anticipate again. The beet processor notes that volatility has increased on the sugar market and sees that sales volumes this summer were worse than previously expected. As a result, stocks are increasing and the pressure on prices is increasing. Cosun expects to sell a lower volume of sugar for 2025 and 2026. Based on this, it has been decided to reduce the intended allocation percentage of 105% for 2025 and to definitively set it at 100%. The allocation percentage for the current campaign year 2024 is and remains 110%. In July, Cosun already had a similar message and the allocation percentage was adjusted from 110% to 105%. Now, one and a half months later, it has been reduced again by 5%.

Cosun uses member delivery rights (LLBs), whereby 1 LLB gives the right to deliver 1 ton of beets (at 17% sugar) at the member price. An allocation percentage of 105% means that a grower may deliver 5% extra beets at the member price. If more than 105% of beets are delivered, a lower price is charged for that volume.