Some European Union sugar users will be left “scrambling for supplies” by prospects for the bloc’s own production which have, again, been dogged by drought, leaving it on track to remain a net importer.
“Another dry growing season” has dashed hopes of a significant recovery in the EU’s beet sugar output in 2019-20 from the drought-depressed level of 17.51m tonnes last season, US Department of Agriculture officials based in the bloc said in a report.
With weaker beet prices too, and the extra risk to farmers of growing the crop after the EU’s ban on neonicotinoid insecticides, the officials pegged EU beet sugar output this season at 17.60m tonnes – well below the USDA’s initial expectations of 19.15m tonnes.
Even with an extra 250,000 tonnes of cane sugar on top, EU output of the sweetener will remain below its own consumption, of 18.60m tonnes, let alone supplies needed for a modest volume of exports, largely to North Africa and the Middle East.
‘Scrambling for supplies’
Indeed, EU sugar output is “expected to be short of the EU consumption… for the second year in a row” in 2019-20, out of the three since the EU ended production quotas, the report said.
The dynamics will see EU sugar imports hit 2.00m tonnes this season, up 100,000 tonnes year on year, and ahead of exports pegged at 1.50m tonnes.
This extends the return to the EU to its historical place as a net importer of sugar, and puts 2017-18 as the only period in a decade of net exports, of 2.54m tonnes, after the ditching of quotas prompted an initial surge in output.
The report also factored in an estimate of stocks of 978,000 tonnes at the end of this season, “less than half the stock level at the end of 2017-18.
“This level will leave some sugar users scrambling for supplies after just one year of abundant supplies,” said the report, although adding that “it is unclear what it will mean for EU sugar prices”.
International sugar prices remain relatively weak, thanks to elevated stocks with which the global market has entered 2019-20, even if the season is widely expected to see a return to a production shortfall.
The comments come days after analysis group Green Pool also forecast that EU sugar output - which it pegged at 17.90m tonnes in 2019-20, including cane sugar – was “likely to keep the EU a net importer of sugar for another year.
“The EU sugar industry just can’t take a trick at the moment, as hot, dry weather scorched beets for a second year running.”
On prices, the USDA report also flagged the growing disparity in sugar values between those in major producing countries, such as France, Germany and the UK, and those, such as Greece, Hungary and Portugal, with less efficient beet industries, where growing has been particularly hit by market liberalisation.
The price in region 1, encompassing major growers, have fell by 7.5% in the year to July to E324 a tonne, according to latest European Commission figures, while that in outlying countries gained 4.0% to E386 a tonne.
This took the premium to E62 a tonne, from E21 a tonne a year before.
“While this price reporting is dominated by contractual sales, including from long-term contracts, and therefore does not reflect spot prices, it still indicates market dynamics,” the report said.