Global sugar market report October

Since our last report in February, Europe suffered a summer of record-breaking temperatures and droughts, while other major sugar-producing regions – like Pakistan, with the highest rainfall in 30 years – saw devastating floods. This extreme and unpredictable weather, combined with the war in Ukraine, means the global supply of sugar has dwindled and prices have risen. Here, we look at the main forces affecting sugar markets in all regions of the world and put our insight and experience to work to predict what could happen next.  

World market supply continues to remain tight with reduced stocks in the main importing countries as prices continue to trade around 18 c/lb (cents per pound), similar to the price at the start of the year. The backdrop behind these firm prices is due to the estimated below average crop in the European Union and UK, continued crop failures in Brazil and the likelihood of reduced Indian exports in 2022/23, as inflation around the world is increasing local prices with the potential for a reduced demand in the sugar market. 

Global sugar production for 21/22 reached 183.5 million tonnes with global consumption rising to 186 million tonnes from 181.3 million tonnes in 20/21 as the global economy recovered from the COVID-19 pandemic. For 22/23, we estimate a reduction in global beet sugar production to around 38.6 million tonnes and an increase in global cane production to 153 million tonnes resulting in total global sugar production reaching 191 million tonnes.  

The world market will return to a surplus of 1.7 million tonnes, compared to a deficit of 1.5 million tonnes in 21/22. Looking ahead, current global weather patterns and the fallout from the ongoing war in Ukraine indicate a large supply deficit in 23/24.  

The development of the beet crop began well, due to early sowing followed by rains in April. Good weather throughout the summer months increased the sucrose yield, but the beet crop has suffered from the continuous heat wave and drought in late summer. Rains in September have enabled root development for those beets that remain in the ground, but this will lead to a reduced sugar content in the beets. 

As a result of the expected reduced yields in the two largest producing countries – France and Germany – coupled with the uncertainty of gas supplies from Russia this winter (most beet refineries are reliant on gas for energy which will cause some refineries to operate at lower capacity), European refiners have brought forward their beet campaigns a week earlier than normal. 

The earlier harvest will result in lower yields, but this is preferable to leaving beets in the fields during the winter, due to potential factory closures. European Union beet sugar production for the 2022/23 campaign is likely to reduce by 1.3 million tonnes to 15.7 million tonnes, compared to 17 million tonnes in 21/22.   

The East of England, where the majority of UK sugar beet is grown, has experienced its driest summer since 1935, with reports of beet yields reducing by 10% to as much as 50%. British Sugar started half its 2022/23 campaign early, on 19 September, and the remaining half will start later in October. 

This differently timed programme is because of the reduced regional rainfall, so the beets will be left in the ground to allow for September rains to hopefully improve the yield. We estimate that British Sugar will produce 970,000 tonnes from the 22/23 campaign, which compares with 1 million tonnes in 21/22. Negotiations between British Sugar and the National Farmers Union has resulted in a record GBP £40 per tonne for beet, compared with £27 per tonne last year.  

The fast-rising costs of production and better returns from other crops, such as wheat, does not bode well for the 2023 beet plantings. The 80,000 tonnes of duty-free quota sugar from Australia have yet to enter the UK in 2022, with most of Australia’s 3.5 million tonnes of exported sugar going to the closer markets in Asia. Brazil, part of the TRQ (Tariff-rate quota), became the UK’s largest raw sugar supplier with 256,000 tonnes in 2021, compared to 90,000 tonnes in 2020. 

Rains in July and August improved the beet yields in Russia and Ukraine, which are considerably higher compared to last year. The beet area sown increased by 4% this year. We therefore estimate that Russia will produce 6.9 million tonnes of beet sugar in 2022/23, compared with 5.9 million tonnes in 21/22. The ban on Russian exports to EAEU countries has now lifted, which will provide a much-needed market.  

With Cuba’s export to China likely to be curtailed in 22/23, Russia may also benefit from this market. Exports for 21/22 are likely to be in the region of 350,000 tonnes, which compares with 440,000 tonnes in 20/21 and 1.5 million tonnes in 19/20 with the preference on protecting the domestic market. 

Despite Russia’s invasion earlier in the year, Ukraine managed to sow only 20% less sugar beet than last year. Three percent of the area under beet has been affected by the Russian invasion and occupation. Beet sugar output for the 22/23 campaign is somewhat uncertain. It has been reported that 10 out of the 32 Ukrainian refineries will not be operational due to the war with Russia, the resulting gas supplies and extremely high prices. 

Despite this, we estimate that Ukraine may produce 1.1 million tonnes of beet sugar because of the large area sown. This will be enough sugar to cover domestic demand and compares with 1.5 million tonnes of beet sugar produced in 21/22.  

Brazilian exports of the 2022/23 harvest are down on last year due to a slow start to this year’s campaign, which began on 1 April. Drier than expected weather on the back of cane damage from last year delayed the cane development. Compared to this time last year the cane sugar production is down 10.5% and ethanol production from cane down 1.2%. 

Better yields are expected in the second half of this year’s harvest with an estimated increase in sugar production of around 3% compared to 21/22. Although sugar and ethanol prices remain firm, the production costs are increasing, which will eat into the high margins that the millers benefitted from last year. 

The industry is still in debt from its expansion during 2000 to 2010 and this may well be a problem if inflation continues to rise. With gasoline prices being more competitive compared to ethanol, mills will divert around 47% of the cane mix to sugar production. The mills are expected to continue crushing the 22/23 cane crop well into December. Total sugar production for 22/23 is estimated at 38 million tonnes, compared to 36 million tonnes in 21/22 and 43.3 million tonnes produced in 20/21.    

Improved rainfall throughout 2021 helped Thai cane sugar production reach 10 million tonnes in 2021/22, compared to 7.7 million tonnes in 20/21. A second year of recovery is expected for 22/23 with an estimated 11 million tonnes of sugar being produced on the back of increased acreage and plentiful rainfall. Prices increases in fertilisers has lowered their use amongst farmers which is resulting in a higher level of weeds in the fields. 

Rainfall in all of India and Pakistan’s major sugar cane producing regions has been plentiful with reservoirs full, which will encourage farmers to plant more cane for the 2023/24 season. The amount of sugar produced in India for in 21/22 reached a record 39 million tonnes. For 22/23 there will likely be a small decrease to around 38 million tonnes, but more than sufficient for supplying the estimated domestic consumption of 27.5 million tonnes. 

Sugar exports are expected to decline to around 8 million tonnes in 22/23 compared to a record high 11.2 million tonnes in 21/22, with ethanol production diverting around 4.5 million tonnes of sugar. Mills will also want to hold carry-over stocks as a contingency against adverse weather patterns, potential agricultural production increases and local price increases. 

In neighbouring Pakistan, the highest rainfall for 30 years has seen extreme flooding damage to cotton and rice crops. The northern Punjab, the largest sugar cane growing region has remained largely intact, with the canes being a fairly water resilient crop. Cane sugar production for 22/23 is estimated to be 9.2 million tonnes compared to 8.6 million tonnes in 21/22.   

Africa’s sugar production for 2022/23 is estimated to rise to 12.4 million tonnes following Egypt’s continued expansion of its sugar beet programme. Africa’s second largest sugar producer began its 21/22 sugar cane harvest in December and finished it in June, with total sugar production for 21/22 estimated at 2 million tonnes. 

The continent’s largest producer, South Africa, experienced disruption to cane sugar production following cyclones Ana and Eloise and higher than usual rainfall. Despite this, the country is estimated to produce 2.2 million tonnes for 21/22 following a poor crop in 2021. 

Swaziland/Eswatini is expected to slightly increase production to 700,000 tonnes for 22/23 due to increased area under cane and continued improved irrigation. Mauritius has experienced excessive rainfall and a lack of sunshine with estimated output for its cane speciality sugar reducing to 250,000 tonnes for the 22/23 crop.

Australia is experiencing a third consecutive year of La Niña conditions due to the warming of temperatures in the western Pacific Ocean. Spring has seen higher rates of rainfall, with flooding in Queensland (which produces 95% of Australia’s sugar) and New South Wales, and further rain is forecast. 

This is affecting the cane quality and the rate of cane harvesting, which started at the end of May. The early forecast is for an improved crop in 2022/23, higher than the 5 million tonnes of sugar produced in 21/22. With record cane prices, farmers will be encouraged to harvest as much cane as possible, with crushing continuing all the way through to December 2022. 

This is a positive position after alternative crops and continued urbanisation in recent years have taken over many of the fields previously used for cane. Australia exports 80% of its cane sugar and remains among the top five exporters of raw sugar onto the global market. 

The sugar beet campaign for 2022/23 has just started and is seen as decreasing slightly to around 4 million tonnes due to cold and wet weather delaying sowing the beets resulting in smaller sucrose recovery from the sliced beets. Cane sugar production in Louisiana and Florida will increase in 22/23, offsetting the slight decline in Texas. 

Hurricane Ian skirted north of the major sugarcane region in Florida, but heavy rainfall has delayed the start of the harvest which was due to begin on 1 October. Total cane sugar production for 22/23 is estimated at 3.6 million tonnes. In total the United States is set to produce 7.6 million tonnes of sugar in 21/22, compared to 9.2 million tonnes in 20/21. A slight increase to 8 million tonnes is forecast for 22/23. 

The US will produce enough home-grown sugar for around 70% of domestic consumption with Mexican and global imports of around 3.5 million tonnes meeting the remaining shortfall. 

The Mexican cane harvest finished in July with sugar production up at 6.3 million tonnes compared to 5.7 million tonnes in 20/21. The area under cane was up by 2% with yields increasing 4.5%. This helped fulfil a 5% increase in domestic demand, whilst exporting 550,000 tonnes onto the world market and 1.3 million tonnes to the United States. The good rainfall currently being experienced will help the cane development of the 23/24 crop.

A deal with 16 least developed countries (LDCs) will see zero tariff sugar entering the country from the beginning of September. With the increasing population and economic growth, China is likely to import 6.1 million tonnes of sugar in 2022/23 mainly for the food and beverage industries. China’s cane harvest ended in July; this may ease some of the pressure the sugar beet industry is facing with farmers switching to growing corn due to better pricing returns. 

China also experienced a long summer heatwave with drought reducing water availability, which poses a serious threat to many of the crop harvests. If the rains do not materialise, it is unlikely that China’s beet sugar production will reach the 1.5 million tonnes produced in 21/22 – the current estimate is 869,100 tonnes. Cane sugar production ended at 8.6 million tonnes for 22/23, down from 9.1 million tonnes in 21/22. Total sugar production for 2022/23 will likely reach 9.5 million tonnes, compared to 10.6 million tonnes produced in 21/22.   

In conclusion, the chaos that COVID-19 brought to the global sugar market, and the extreme weather and political unrest that compounded it have impacted supply and prices in a way that affects everyone in the food and beverage industry. 

At Ragus, we are continuously tracking and evaluating the direct as well as the indirect influences of all the factors that constantly shape our industry. To learn more about our products, please contact our Customer Services Team. To see more sugar news and updates, continue browsing SUGARTALK and follow Ragus on LinkedIn.