Raw sugar prices have been range-bound recently and currently sit around US Cents 12-13/lb. The main characteristics of the market may be summarised as:
- Following a very large global surplus of some 12 million tonnes in 2017/18, resulting from large crops in India, Thailand and the EU, a small surplus (of some 3 million tonnes) is expected in the current 2018/19 year (October/September);
- A deficit is projected for 2019/20 of some 4 million tonnes;
- Indian production in 2018/19 is expected to be around 32 million tonnes and the Government has recently announced an increase in the minimum support price;
- Major stocks are being held in India. While 5 million tonnes are covered under the subsidy-linked export programme in 2018/19 and 2019/20, prices are not currently attractive enough to encourage exports;
- A smaller (weather affected) cane crop in Brazil with a lower sugar/ethanol mix resulted in lower national sugar production (29-30 million tonnes) in 2018/19. Despite a dry start to the inter-crop period, around 30 million tonnes sugar could still be expected in C/S Brazil in 2019/20;
- A weak, drought affected, European beet crop in 2018/19 has lowered production in that market thereby increasing imports and reducing exports;
- Lower drought affected beet crops in Russia and Ukraine in 2018;
- In Brazil, the Renovabio initiative which will boost demand for ethanol, backed by tradeable emission certificates, could start as soon as 2020.
Refined sugar The whites market was recently characterised by a combination of increased supply out of India and weak Chinese import demand with the net effect being a sharp decrease in the premium which fell below US$ 50/t prior to March expiry. However lower exports from drought affected Europe and Brazil have provided support and the premium now sits around US$ 70/t.
As noted above, with a shortage of EU origin sugar, recent white sugar spot prices have been at a significant premium to export parity and in the region of Euro 400/t ex works NW Europe.
The impact of the large crop and resulting low prices in 2017/18 and contracted values in early 2018/19 is starting to show in terms of consolidation and rationalisation in the EU industry. Sudzucker has recently announced the closure of two factories as part of its 700 000 t reduction programme and other producers are expected to follow suit. The outcome will likely be growth in the most competitive regions with fewer factories overall, higher output per plant and lower unit costs.