RoyalCosun

Analysis sugar

Higher estimates for sugar production in Europe

May 7, 2024 - Jesse Torringa

The sugar futures market started stable in the first days of May, after a significant decline was observed in April. In Europe, it is expected that the sugar beet area will increase, but that does not necessarily mean that European production will also increase.

In Europe, attention is focused on the sugar production of 2024/25. In the current season 2023/24, according to the European Commission, about 15.6 million tons of sugar have been produced, 7% more than the previous season and reasonably in line with the five-year average. Various raw material market agencies are not far off with their own estimates, such as Czarnikow. The upcoming season is expected to see further growth in sugar production. It is expected that the high sugar prices will lead to more sugar beets being sown in Europe, which should provide more raw material for sugar production. The growth is estimated at 2%.

But that is the expectation, as to date the sowing of sugar beets in Western Europe is significantly delayed, as indicated by the European Commission in the quarterly report on raw materials. The precipitation, like in the Netherlands, is also causing significant delays in other parts of Western Europe where European sugar beet cultivation is largest. Due to the heavy rainfall, sowing is delayed, resulting in fewer growing days for the plants than usual. This leads to lower yields. Therefore, the expansion in sugar beets may be offset by low yields. A similar sugar production of 15.6 million tons is therefore not a remarkable estimate.

It is expected that sugar consumption in Europe will also increase slightly according to the Commission, after consumption decreased somewhat last year, although no concrete figures are reported. This is related to the decrease in consumption due to the significant increase in sugar prices and sugar-containing products over the past year.

FAO Sugar Price Index Declines
The sugar price index of the Food and Agriculture Organization of the United Nations (FAO) decreased by 4.4% in April compared to March. Compared to April of the previous year, the decline is 14.7%. The index stands at 127.5 points for April 2024. According to the FAO, the decline in sugar prices is mainly due to improved prospects for global supply, particularly as a result of larger than expected production in Asian countries. Improved prospects for Brazilian sugar production also contribute to the decline.

Futures Market Starts Stable in May
The sugar futures markets reflect the price decline in April well. In early April, the London futures market was around $650 per ton, after which the price dropped significantly to $560 per ton in mid-April. As of Tuesday afternoon at the time of writing, the white sugar contract in London is at $570 per ton. The price has remained relatively stable since May following the sharp drop in April. The improved sugar production in Asia puts some pressure on the futures market, but sugar production is not much higher than previous estimates. On the other hand, the strengthening of the Brazilian currency makes sugar exports more expensive. Attention is also focused on the Brazilian sugarcane growing season. Recent rainfall improves the prospects for higher sugar production, but last season's record is unlikely to be achieved.

Jesse Torringa

Jesse Torringa is a market specialist in seed potatoes and organic potatoes, onions, and carrots at DCA Market Intelligence.
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