Non-EU beat growers fear for prices amid sugar surplus forecast

Projections of a global sugar surplus this year are creating price anxieties for non-EU beet producers, a situation in marked contrast with fears of undersupply among some EU sugar-based industries.

In its first Sugar Quarterly of 2012, Rabobank projects a global sugar surplus of six million tonnes for the 2011/12 international crop year. While the harvests of the EU, Russia and Ukraine have ended, output expectations for key states such as China, India and Thailand will take another month or two to confirm.

However, the projections for Brazil’s sugar cane harvest — due from April onwards — range from 500m to 560m tonnes. If this finishes at the upper end of the projections, the ensuing surplus could drag more heavily on international prices.

According to Rabobank projections, if Brazil’s crop comes in at the lower end of expectations, sugar and ethanol production would be virtually unchanged from last season.

However, if the Brazilian crop comes in at the upper end of expectations, sugar and ethanol output could rise significantly, with marked implications for local ethanol prices and international sugar prices.

One Rabobank analyst said: “Many uncertainties surround the new Brazil harvest, due to start in April. The average of cane in the fields is still above ideal, limiting significant productivity gains. Rabobank’s preliminary forecast is 522m tonnes. However, the 2011/12 harvest reaffirmed how hazardous it can be to forecast at this stage of the crop cycle. The weather at this stage is critical for cane development, and so far it appears to have been favourable.”

European prices for sugar were strong during 2011. EU sugar producers reported record annual growth in revenues and profits in 2010/11, with strong demand from soft drinks and other sugar- based manufacturing industries, as well as the non-food biofuel sector.

A longer EU growing season also saw production reach 17.7m tonnes in 2011/12, up 15% from the previous year.

In February, the EU awarded import licences for 95,000 tonnes of non- EU sugar, bringing the 2011/12 import total so far to almost 827,000 tonnes.

However, the EU also suspended emergency supply measures, such as the re-classification of non-quota sugar as quota sugar. The EU will re-evaluate this measure in the middle of the year.

Meanwhile, the UK Industrial Sugar Users Group (UKISUG) is demanding that the EU go ahead with its intention to abolish sugar quotas by the end of 2015.

An industry body for British-based soft drinks firms, confectioners and other sugar users, UKISUG, told the EU its members have put job-creating expansion plans on hold due to uncertainty over the EU’s sugar quota position.

While some sugar producers in the EU are demanding that the quota be retained for several years, UKISUG says it needs competitively priced ingredients to advance with its growth ambitions.

UKISUG spokesman Richard Laming said: “The commission should take action in advance of 2015 to instil genuine com- petition in the market, ensure balance between production of beet and cane sugar continues and guarantee security of supply by ensuring imports of cane sugar at least meet levels of EU refining capacity.

“This can be achieved by introducing duty-free import quotas that are accessible to all stakeholders...”

UKISUG sent the EU Commission a policy paper, built on three core demands: to abolish beet production quotas by Sep 20, 2015; to reduce import tariffs on non-EU cane; and to guarantee imports of duty free cane post-2015.