Sugar Market Intelligence

Industry Outlook & Drivers

Global Market Outlook on Sugar

Global supply surplus is expected to be 8-10MMT for 2017/18.EU has contributed to the surplus production globally, however, its consumption is stable with the market share of 11 percent

• Post removal of quotas contribution of EU's production to the world increased by 2 percent (4MMT)
• With estimates of global surplus Brazil's production declined by an approx. 1 percent for 2016/17 and estimates for 2018/19 further declined with global surplus and decreasing margins over sugar production
• Production of India, Thailand and EU has been drastically high in 2017/18, oversupplying the market
• EU production will likely stabilize and decline owing to excess supply depressing the EU prices post quota removal
• Consumption in all the major producing countries have been almost stable over the years

Supply and Demand

Global supply surplus is expected to be 8-10MMT for 2017/18 with excess supply from EU, India an Thailand.

Supply for 2017/18 has increase by 5-6 percent compared to previous year, whereas consumption growth is only 1.5-2%.

• Production for 2017/18 reached 191.8 MMT, an increase by 10 percent mainly contributed by excess production in India, EU and Thailand
• Europe has gained its market share recently post removal of quota and is expected to occupy its growth from Brazil in 2018/19
• Global production in 2017/18 increased by 18MMT of which 2-3MMT is contributed from EU
• Brazil is the leading producer occupying 23 percent of the global production followed by India and Europe with 13 and 11 percent market share, respectively
• With global surplus and dropping margins, Brazil has decided to bring down its crush rate

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