The world sugar market is reeling from an over-supply brought on by increased production in Europe, Russia, India and Asia. Europe is forecast to have an export surplus of about 4 million tonnes in 2018 compared with 1.35 million tonnes before the abolition of production quotas.
“We have seen significant price movement in the past 12 months as it became clear Europe was headed for a sizeable export surplus, and new cane plantings in Asia and India have started to come through,” says John Stansfield, sugar analyst at Group Sopex in London.
India in particular has increased production in recent years from about 20 million tonnes in 2017 to 27 million tonnes this year. Production is forecast to rise to between 29 and 30 million tonnes in 2019.
“India is where the big production gains are being made. It is reaping the gains of cane plantings made three years ago when prices were higher,” he says.
Production in Russia and Ukraine has also risen sharply in recent years, from about 4.5 million tonnes to an estimated 6.5 million tonnes in 2017/18.
“Production in Russia and Ukraine is being driven by a bigger crop area and efficiency gains as producers adopt European management techniques, in particular crop protection products. These countries are competing directly with Europe on the world market, so it’ll be interesting to see if this progress can be maintained and how close they can get to European yields,” he says.
The surplus in Europe has resulted in a near 40% fall in the price margin refined sugar trades at over raw sugar as processors seek to move surplus stocks.
“Europe’s processors are battling with cane sugar refiners in the Middle East for market share. We have already seen one refinery close because of market pressure,” says Mr Stansfield.
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