Sugar Market Trends
Category Intelligence on Sugar covers the following
- Information relating to market, supply, cost, and pricing analysis
- Hard to find data on cost and TCO models, supplier details, and performance benchmarks
- Macroeconomic and regional trends impacting cost, supply, and other market dynamics
- Category-specific negotiation and sourcing advice
Industry Outlook & Drivers
Global Market Outlook on Sugar
With the global sugar market witnessing a deficit of 9.3 MMT in 2019-20 the supply is likely to recover for the next crop
- The global sugar market is expected to record a surplus of 9–10 MMT in 2020/2021, amid high output in key sugar growing countries such as Brazil, India and US; with global sugar production projected to increase 13.2 percent Y-o-Y
- Further, looming uncertainty in demand from downstream processors due to Covid 19 is likely to raise stockpiles
Major Producing Countries
Production has been consistently increasing in all the major producing countries, significantly 38 percent increase in EU post sugar quota removal.The market is currently facing massive supply with high production from EU, Thailand and India.Anticipated El Nino conditions could be expected to curb the production in the Asian countries.Production in India dropped in 2016/17, however, increased by 46 percent in 2017/18, glutting the global market.
Trade Dynamics
Exports in the global market were impacted with barrier in China for imports, however, with declining stock levels in China it could be expected to reopen the import trade by 2018/19.
Despite Brazil being the leading exporter, sugar exports dropped in June 2018, down by 2.12 MMT than May 2018.
- Imports trend remain stable, whereas global exports are consistently increasing, flooding the market
- Exports of Refined sugar has gone up by 20 percent globally, with increase in exports of EU alone by 2.2 MM, which contributed to 50 percent of the total increase of exports
- Major importer of sugar is Indonesia with 8 percent of market share. Prior to import restrictions by the government, China was the largest importer of sugar globally
- Exports of India and Europe has surged beyond 50 percent with high production and removal of quotas in UE
- Brazil exports declined this season with declined production estimates
Supply and demand of Sugar
With surplus supply of 24.5MMT hitting the market currently, plantings for 2018/19 is scaled down and the production could decline by 4 percent
Production in EU for 2017/18 has reached 21.15MMT, 16 percent higher after the quota removal in 2016/17
Quota Relaxation Impact:
- Until September 2017, European Union had production limitation which was removed as of October 2017
- Sugar prices were attractive in Europe until 2017 and so, major producers like Germany and France increased acreage by 25 percent for 2017/18 to be released at the end of sugar quota
- In 2017/18 season, production estimates of sugar reached 21.15 million metric tons from 18.3 million metric tons from last season
Imports of Sugar
Imports have declined by an approximate 45-50 percent in 2017/18 when compared to 2016/17 and the trend is expected to continue in 2018/19.
Import dependency has reduced drastically with removal of limitation in production.
Quota Relaxation Impact:
- With favorable sugar production quotas, EU imports have been cut down by nearly half from 2.6MMT in 2016/17 to 1.4MMT in 2018/19
- Stocks in EU is expected to increase to 2.2MMT than the year previous with favorable beet and cane production this term, which in turn will reduce imports further
- Decline in refined sugar imports were 55 percent, whereas that of Raw sugar were 40 percent from that of 2016/17
Exports of Sugar
Europe could be expected to become net exporter in 2017/18 and 2018/19 with high production, however export prices are highly competitive.
Exports more than doubled this year, witnessing a consistent increase owing to surplus production this year and removal of export barriers.
Quota Relaxation Impact:
- Until September 30th 2017, sugar imports and exports were highly restricted in Europe to control the sugar prices and support Least Developed Countries
- Since 1st October 2017, export barriers were removed and at present, European countries are exporting sugar at zero duty. This unrestricted situation is expected to increase the current season's exports by more than 45 percent from 2016/17
- Exports of 2017/18 is estimated to be 3.7MMT, 150 percent jump post removal of quotas of which 99 percent of exports are of Refined sugar
Cost Structure Analysis
Raw material cost is the major impacting factor of the sugar price which contributes up to 80 percent of the production cost.
Sugar companies having diversified production segments other than sugar segment have been shielded from losses to certain extent.
Quota Relaxation Impact:
- With anticipation of falling feedstock (beet) prices post quota removal, many French beet producers engaged in prior price contracts for 1-2 years
- However, sugar companies including key players in Europe are struggling to breakeven with falling sugar prices consistently
- With excess feedstock and dropping sugar prices globally, majority manufactures produce excess to cut down production cost and improve margins in EU
- This further intensifies the supply glut situation and drops the sugar prices further down
