Analysis Sugar
Market expects declining sugar prices this season
The sugar quotations remain under pressure due to various issues. For the upcoming season, a higher sugar production is expected compared to last season. The German sugar producer Nordzucker benefited from good sugar prices last season but is less optimistic for the upcoming season.
Sugar beet processor Nordzucker recently announced the figures for the financial year 2023/24, which runs from February to February. The operating result of €421 million almost doubled compared to the previous financial year and is also the second-best result in the company's history.
Lars Gorissen, CEO of the sugar producer, stated in a press release that the company looks back on a very positive season with a good result. The main reason for this is the increased sugar price compared to the previous year, which has more than compensated for significant cost increases in raw materials and energy supply.
Nordzucker's sugar beet campaign in 2023/2024 was characterized by high volumes but below-average sugar content and a long campaign duration. Due to wet and cold weather conditions, the campaign in Europe was one of the longest and most challenging in recent years, with an average duration of 135 days. The company also mentions that the price outlook for the new season is less positive. "There are signs that sugar prices may decline. Reasons for this include increasing production capacity in the EU and imports from Ukraine. Furthermore, world market prices for sugar are expected to decrease. The market remains volatile," according to the press release.
Sugar Quotation
Returning to the sugar market, we see that the downward trend has already begun. On April 1, the London futures market quotation stood at $652 per ton of white sugar, but has since dropped significantly. London closed yesterday (Monday, May 27) at $545.90 per ton, which is somewhat higher than the low point on May 16 of $527 per ton. The raw sugar contract in New York shows a similar decline since April 1.
It is not new that both the global and European sugar markets are under pressure. The supply on the world market has increased significantly over the past year, partly due to the record-high production in Brazil, which partially compensated for the moderate productions in Asia. These sugar productions turned out to be not as subpar as initially expected. In Europe, sugar production is increasing again after last year's moderate sugar beet harvest. Additionally, the free import of Ukrainian sugar is creating more competition in the European market.
The sharp decline in sugar quotations has currently stabilized, but there are indications that the quotation could further decrease. In Brazil, more sugar cane is being harvested earlier than usual at the start of the season. The Sugar Association Unica reports that Brazil produced 84% more sugar in the second half of April compared to a season ago, which is putting pressure on the quotations. Moreover, the planted acreage increased last year. Attention is also turning to the next harvest season in Asia, where higher yields are expected than in 2023/2024. The monsoon rains, which benefit, among others, Indian sugar cane areas, were disappointing last year. This season, the monsoon rains seem more favorable.
Global Sugar Production Increases
Global sugar production is expected to increase by 2.5 million tons to 186 million tons in the upcoming season 2024/25, as reported by the US Department of Agriculture USDA in a late May report on the global sugar market. In 2023/24, USDA estimated sugar production at 183.5 million tons. While they expect Brazil to produce less in the coming year after their recent record production, countries like Thailand, India, China, and Mexico more than make up for it. These countries had lower sugar productions in the current season.
