Decrease in Global Sugar Production As Sugar Prices Rise

Jan 24 2019

Market Position
The 2018/19 sugar beet harvest is entering its tail end and attention is now turning to the 19/20 sugar crops for both beet and cane. Prices are still low following the huge surplus of 2017/18 and the smaller surplus of 18/19, although prices are now at a two month high as the 19/20 crop is predicted to be in deficit, a result of smaller planted area in the EU, India and Thailand. Global sugar prices are slowly heading towards 15 c/lb which would entice Brazilian millers to allocate more cane to sugar production. El Niño weather pattern is predicted for the Northern Hemisphere this winter, creating an early end to rains in Brazil and drier conditions in Asia. Global sugar production for 2018/19 is estimated to fall by 15.5 mln tonnes to 185.3 mln tonnes as a result of a downward revision of the crop outlook in Brazil, European Union and India. This compares with the record of 200.8 mln tonnes produced in 17/18. The global sugar beet production for 2018/19 will decrease to 43.2 mln tonnes, down from the record 45.7 mln tonnes last year. Global cane sugar production for 2018/19 will decrease by 11.7 mln tonnes to 143.4 mln tonnes. This compares with a record 155.1 mln tonnes produced in 17/18.

The 2018/19 northern area beet crop started with delayed planting due to snow followed by increased rainfall in early March 2018. Improved weather in April and high temperatures in May saw rapid beet development until the end of June. Subsequent prolonged dryness has consistently reduced the yield forecast for the 18/19 crop and slowed beet harvesting as farmers have struggled to lift the crop from the soil. Sugar production for the 2018/19 season is estimated at 18.4 mln tonnes, a reduction of 2.8 mln tonnes compared to the previous crop. EU producers are talking of a reduction in beet planting for the 19/20 crop to allow a draw down on stocks. White sugar exports for 2017/18 (Oct-Sept) finished at 3.6 mln tonnes, with raw sugar imports at 1.3 mln tonnes. European prices are starting to rise, in contrast to falling world market prices. In the UK the beet sugar production is forecast to reach 1.15 mln tonnes, down on last year’s 1.37 mln tonnes as a result of reduced yields. A no deal Brexit could lead to higher import tariffs in the UK of €339 per tonne for raw sugar for refining and €419 per tonne for white sugar or raw sugar for direct consumption.
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Russia & Ukraine
In 2018 both Russia and the Ukraine reduced the planted area for sugar beet as a result of the cold and wet winter. Russia experienced a dry summer resulting in poor beet yields down 13% and the Ukraine achieved high beet yields but poor sucrose content. Early indications for the 2018/19 harvest is Russia producing 6.35 mln tonnes, down from 7.1 mln tonnes in 17/18 and the Ukraine producing 2.0 mln tonnes of sugar.

Brazilian mills are watching the falling gasoline price in their domestic market, which is affecting the biofuel price. Mills will focus their attention on producing sugar, helped also with the current low fobbing prices for shipping. For the 2018/19 crop the hydrous share has been at 62% compared to last year’s 17/18 crop which was at 43%. This results in the Brazilian mills being able to add or remove close to 10 mln tonnes of sugar from the global market! Sugar exports reduced by 30% which has helped lower the world sugar surplus. The end of the 2018/19 harvest has been disrupted by heavy rains, sugar production is estimated at 30.4 mln tonnes, which is some 10.0 mln tonnes less than 17/18 production. The 2019/20 cane development will be good as the weather has been wet since August, improving soil moisture content, which was very dry in the early part of 2018. The 19/20 harvest will commence in April.

The 2017/18 harvest was a record crop, producing 15 mln tonnes of sugar with the harvesting ending in June 2018. This amount is significantly more than the 10.3 mln tonnes produced in the 16/17 season. Sugar production for 2018/19 is expected to be slightly lower at around 14.5 mln tonnes due to a lack of rain at the tail end of the cane growing period, although the sugar yield is expected to be good. The Asian market is however seeing a decline sugar consumption as a result of governments increasing taxes on sweetened beverages.

Sugar production for the 2018/19 crop is likely to be 30.7 mln tonnes, which will be down on the previous crop due to a below normal monsoon in the 2018 planting season, which limited sowing of the canes as farmers will have limited access to available low ground water levels and reservoir water. This delayed the start of the harvest with early indications of lower yields. Domestic prices have remained on the floor despite government incentive payments and millers are not enthusiastic to export due to cash flow restraints, resulting in a large carry forward of stock. With general elections due in 2019, the government is taking steps to support millers so that farmers will be paid on time. Exports in 2018/19 will be lower than the 5 mln tonne target set by the government, due to a strengthening rupee and falling global prices. The amount is likely to be 2.5-3.5 mln tonnes.

African cane sugar production increased to 9.4 mln tonnes in 2017/18 after poor yields in 14/15 and 16/17. For 2018/19 it is very likely Africa will produce as much as 10 mln tonnes for the first time. South Africa is projected to produce 2.3 mln tonnes in 18/19, after the recovery of the cane yields. Mauritius reduced its forecast for the 2018/19 crop to 324,000 tonnes of cane sugar produced, down from 355,000 tonnes produced in 17/18. Mauritian production is in long term decline having halved over the last three decades.

Crushing of the 2018/19 crop began in late May and ended in December resulting in a reduced amount of cane crushed, although the actual sugar content was at its highest for a decade. Warm and dry weather, close to drought conditions was the main reason for the reduced amount of cane harvested. Cane sugar production for the 18/19 season is forecast at 4.9 mln tonnes which would still be up from the 4.7 mln tonnes produced in 17/18. The Trans Pacific Partnership-11 has taken effect for six countries resulting in Australia becoming the favoured origin for the majority of the 1.3 mln tonnes of Japanese raw imports over Thailand.

Wet weather has delayed the beginning of the Mexican harvest and early indications point towards a reduction in sucrose content, although it is early days for the 2018/19 cane harvest. Forecasts for the 18/19 sugar production have increased to 6.25 mln tonnes due to more planted acreage of cane. The 2017/18 harvest produced nearly 6 mln tonnes of sugar, so stocks are high with the likelihood of Mexican exports onto the world market. A smaller 2018/19 US sugar production of both beet and cane, estimated at 8.4 mln tonnes will see an increase in Mexican sugar imports during 2019. The US beet crop will be reduced as a result of cold weather impacting on the harvest. Cane sugar production for 18/19 will remain at around 3.7 mln tonnes.

The government’s corn support policy has led to falling prices in recent years. Farmers have switched to growing sugar beet which has increased the area under cultivation. Improvements in mechanisation and new beet varieties, coupled with modernised factories has increased beet sugar production by 56% in 3 years and China is expected to produce 1.5 mln tonnes of beet sugar for the 2018/19 season up from 1.25 mln tonnes. Cane sugar production will remain constant at around 10.1 mln tonnes. Domestic prices have fallen to a three year low, which may see a fall in cane cultivation for 2019/20.

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BREXIT: the position of the European sugar sector

Jun 29 2018


EU beet sugar manufacturers, represented by CEFS, and sugar beet growers, represented by CIBE, regret the departure of the UK from the EU.[1]

We remain convinced that the best option to avoid disruption of EU-UK trade and of the EU sugar market itself would be for the UK to remain in the Single Market and customs union.

Given that these options seem less likely under the current UK government, we would like to highlight a number of concerns.

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Transition period

CEFS and CIBE welcome the proposal of the European Commission for a status quo transition period to cover the period between the official departure of the UK from the EU in March 2019 and the entry into force of a new EU-UK trading arrangement.

We call for flexibility concerning the duration of this transition period in the light of past experience. No EU trade agreement has been concluded and provisionally applied in 21 months. Should no agreement be in place by 31 December 2020, the transition period should be extended in order to avoid a ‘trade gap’ and consequent disruption of sugar trade flows between the EU and the UK.

Future EU-UK trading arrangement

After Brexit, the UK will be a major third country export market for beet sugar from the EU-27. The UK is a deficit sugar market and depends on EU exports to meet domestic consumption. It is therefore essential that sugar producers in the EU-27 retain current access to the UK market with minimal disruption during the period of negotiation and implementation of the new trading arrangement.

The trade policy that the UK government looks likely to pursue raises risks. A reduction of duties applied to imports of raw sugar for refining would result in increased quantities of refined cane sugar on the UK market. This could prompt an increase in exports of UK beet sugar to the EU: in other words, triangular trade. We call on the European Commission to take steps to prevent this.

The current status of the UK as an EU Member State must not prejudice the discussions on rules of origin. In line with the EU’s other bilateral trade agreements, the refining of imported, third country cane sugar must not confer origin under the new trading arrangement. Non-originating sugar used in the manufacture of processed products to be traded under preference must be subject to an upper threshold by weight. Cumulation of origin must be prohibited.

The EU’s existing market access concessions

The EU’s concessions on sugar were negotiated as a bloc of 28 Member States. These concessions must be fairly divided between the UK and the EU-27 to reflect the respective import shares of each partner. This goes for the EU’s WTO (‘CXL’) tariff-rate quotas and for the bilateral quotas, most notably with Central America and South Africa.

The EU beet sugar sector cannot afford the increase in real market access for third countries that would result from maintaining the EU-28 quotas at their current level for a diminished EU. Leaving the Central America and South Africa TRQs undivided would result in an increase in real third country market access to the EU-27 of 120,000 tonnes, based on historical quota utilisation rates.

The EU sugar sector’s request

– The duration of the transition period must be as long as necessary in order to avoid any disruption of trade between the EU and the UK. Maintaining current EU-27 access to the UK market – and vice versa – is a priority for the members of CEFS and CIBE.

– After Brexit, the UK will be a major third country market for beet sugar from the EU-27. It is therefore essential that sugar producers of the EU-27 retain the current access to the UK market without disruptions.

– If keeping the UK in the customs union is not viable, the EU must put mechanisms in place to ensure that it is not a victim of triangular trade in sugar.

– The EU’s existing market access concessions must be fairly shared between the EU and the UK. This goes for the EU’s WTO (‘CXL’) quotas, as well as for those bilateral quotas with partners such as Central America.

– Strict rules of origin are essential for any EU-UK free trade agreement. This means, in line with the EU’s other free trade agreements, refining must not confer the origin.[2] In addition, processed products traded between the EU and the UK must be subject to upper weight thresholds for the amount of non-originating sugar that may be used in their manufacture. Cumulation of origin must be prohibited

– The European Commission, Parliament, and Member States must take Brexit into account in the context of ongoing and upcoming trade negotiations with Mercosur, Mexico, and Australia. The EU must henceforth engage in free trade negotiations as a Union of 27, not 28, Member States.

[1] CEFS’ UK membership did not participate in the formulation of this statement and as such should not be assumed to have agreed or disagreed with its content.

[2] In customs terms, this means that the manufacture of products falling under HS heading 1701 must be subject to at least a change in tariff heading in order to benefit from bilateral preferences.

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Record Global Sugar Output In 2017/18

May 17 2018

Market Position

As predicted in our last report in November, La Nina effect has created excessive rains in Europe, delaying sugar beet planting and created dryness in Brazil which is starting to affect sugar cane development. Sugar prices in late April traded at 10.69 c/lb compared with 14 c/lb in November, 17 c/lb in May 2017 and 20.5 c/lb in November 2016. Contributing factors to the falling sugar prices are a result of a global surplus, falling Brazilian ethanol prices, a weaker Brazilian currency and a realisation of bigger crops in both India and Thailand. With a record Indian 2017/18 crop producing 31.2 mln tonnes of sugar, with further increases predicted for the 18/19 crop, Indian exports will continue to flow (with or without a subsidy) to prevent lower domestic prices, leading to cane arrears and the potential for angry farmers in a government election year. With the potential flood of Indian sugar onto the world market, many producers are yet to announce their prices, adding to a more bearish market. Tereos director of their Brazilian unit, Jacyr Costa Filhohas quoted Reuters saying that 90% of the world’s sugar producers are producing below the cost of production at today’s current prices and that traded prices would need to increase to 15-16 c/lb for Brazilian mills to be reasonably profitable.   Global sugarcane production for 2017/18 peaked at 155.6 mln tonnes, compared to the previous record in 13/14 of 146.3 mln tonnes. 2018/19 sugarcane production may fall back to 152 mln tonnes as a result of the expected fall in Brazilian output. Global sugar production for 18/19 is estimated to fall by 4.9 mln tonnes to 196.2 mln tonnes, but would remain the second largest ever after 2017/18 record production of 201.1 mln tonnes.

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The beet producing areas of Europe have experienced increased rainfall which delayed planting in March, but improved weather in April saw most of the beets sown. The subsequent high temperatures in May has allowed for rapid beet development which may offset the late start. Early estimates for the 2018/19 crop is for the EU to produce 20 mln tonnes of beet sugar.  Future EU beet yields from the 19/20 crop onwards may be threatened as a result of a change in policy over the use of Neonicotinoids, a widely used insecticide, which are used to protect the crop against pests. Farmers have indicated that crop yields could drop by 12% across the EU, with the potential of a 50% decrease in ocean climate zones. Greenpeace EU food policy director has stated that yields of Rapeseed have not declined since the ban for the crop in 2013. As we come to the end of the half way stage in the first post-quota season, total white sugar exports for the first six months of the 2017/18 crop has been 1.820 mln tonnes. The EU exported 1.328 mln tonnes of white sugar in 16/17 with the commission predicting exports to rise to 2.8 mln tonnes in 17/18. This compares with total sugar imports into the EU for the first six months at 662,000 tonnes, compared with 1.140 mln tonnes a year ago.

Russia & Ukraine

Russia and the Ukraine experienced the same cold and wet weather as the EU countries in March, delaying beet sowing, with Russia only managing to plant 39% of their target area by the end of April. Ukraine managed to plant 84% of the targeted area by the end of April, with an estimated 5% reduction in planted area for the 2018/19 crop.


Harvesting of the 2018/19 cane crop began in late April. The dry weather has allowed millers to crush at a high pace, but the dry conditions could slow the cane development. This is of major concern as the dry season is yet to come. With soil moisture much lower than average, this could damage the canes that are scheduled to be harvested later in the crop at the year end. Despite the recent drop in hydrous prices, fuel remains more profitable to millers than sugar. The latest estimate for the 18/19 sugar production is 31 mln tonnes, which is 5 mln tonnes less than in 17/18. This reduction will reflect in lower export availability in an already oversupplied world market. The sugar mills are currently incentivised to produce for the strong ethanol market, compared to the oversupplied sugar market, but with Brazilian election this year, the Brazilian currency may decide where millers will sell their product.


Harvesting the tail of the 2017/18 cane crop which began in late November will continue into May. Ideal growing conditions in 2017 has resulted in a record crop after two years of drought, with estimates at 14.3 mln tonne of sugar, compared to 10.2 mln tonnes in 16/17. The rainy season has just begun, receiving above normal levels. Good rains now will benefit cane yields for the next crop in 18/19. Sugar production has focused on raws rather than whites, due to the limited capacity of the centrifuges and boilers to make white sugar from raws and the local market also serves as an additional outlet for white sugar, allowing raws to be exported. China has also become a declining market for Thai white sugar as a result of high stocks in neighbouring countries and more stringent border controls.


The 2017/18 sugar cane crop is estimated to produce 31.2 mln tonnes and with a record cane acreage for 18/19, India is estimated to produce a further 2 mln tonne of sugar over the current crop. A good 2018 monsoon season will determine the country’s future output potential. This has resulted in a downward trend for domestic Indian sugar prices which are now $100/t below world market prices. These lower sugar prices mean that millers are unable to provide cane payments resulting in high cane arrears. The government last Wednesday announced the anticipated cane subsidy to farmers, of 55 INR/t in the form of direct payments, this subsidy will aid the mills by clearing a portion of cane arrears owed to the farmers, which will encourage mills to export the allocated quota of 2 mln tonnes.

Southern Africa

South Africa which has suffered droughts since 2014/15, saw sugar production fall to only 1.6 mln tonnes in 16/17. Improved rainfall saw the cane crop recover in 17/18 with sugar production rising to 2.1 mln tonnes. Estimates for the 18/19 crop are similar to last year’s output. In Swaziland good rainfall at the start of the year was critical to cane development and allowed farmers to re-plant cane following the recovery of the 2016 drought. As a result, a 6% rise in production is expected. Cane deliveries to the mills began earlier this month in Zimbabwe, with sugar production expected to increase by more than 22% as a result of land reforms. Growers are experiencing increased output due to irrigation from the recently built Tugwi-Mukosi dam. African cane sugar production in 2017/18 was 9.5 mln tonnes and is expected to rise to 10.2 mln tonnes in 18/19.


Harvesting the 2018/19 crop is expected to start in June following a slight delay after the tropical cyclone Iris hit the northern Queensland province. Increasingly farmers are looking at other crops such as rice, due to Australia’s exposure to exporting onto the world market (low global prices) and lack of suitable land that is close to the sugar mills. Cyclones and drought affected the 17/18 crop, although rains later in the year allowed for some recovery, so sugar production finished at 4.7 mln tonnes the same as in the previous season. Estimates for the 2018/19 crop is to produce 5.0 mln tonnes of sugar.


The Mexican government has lowered its estimate for the 2017/18 cane crop which is nearing completion to 5.98 mln tonnes, down from earlier predictions of 6.2 mln tonnes. This will not affect exported sugar to the US as the quota of 1.7 mln tonnes will be achieved. Estimates for the 18/19 cane crop are similar to this year due to a stable planted area. The USDA has adjusted its estimate for the total sugar production of the 2017/18 cane and beet crops at 9.14 mln tonnes. The first projection for the 18/19 crop will be released later this month, with total sown sugar beet area about 2% lower compared to this time last year due to cold and wet conditions, although phenomenal progress with planting has occurred in the last two weeks. However, the lateness leaves the beets vulnerable to drought stress through the summer months. Sugarcane production is estimated to hardly change for 2018/19 at 3.6 mln tonnes.


The government is expecting an increase in sugar production to 10.6 mln tonnes, an increase of 4.2%, as a result of increased planted area for the 17/18 crop. Beet sugar production increased 56% over the last three seasons and reached 1.3 mln tonnes in 2017/18. There has been much investment in cultivation, mechanisation and new modern factories being built to help boost production. This could outweigh the increase in consumption as the demand for high fructose corn syrup remains strong. China is expected to import 3.2 mln tonnes of sugar, a slight increase over the 2.29 mln tonnes imported in 16/17.


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Bumper Sugar Crops To Increase Global Surplus

Nov 09 2017

Market Position
October has seen sugar prices continue to decline, trading around 14 c/lb, compared to 17 c/lb in May and 20.5 c/lb this time last year. This is a result of a large expected global surplus in 2018, from estimated strong production increases in the EU, India (both having just begun harvesting), Russia and Thailand. As usual a note of caution must be heeded as Brazil’s 2018/19 production will be based on older canes, which will require ideal weather conditions to maximise sucrose yields and the sugar to ethanol mix will change over the coming months. The predicted global supply-demand surplus is over 6 mln tonnes for 2017/18 after two years of deficits. Global consumption remained at 180.2 mln tonnes in 16/17. For 2017/18 consumption is expected to raise by 2.2% to 184.2 mln tonnes as a result of Indian prices dropping and increased domestic production. The weather in the next four months will be critical for northern hemisphere harvesting and Brazilian intercrop with the potential for La Nina conditions increasing. La Nina could affect key sugar producing countries by creating dryness in Brazil and excessive rains during the European and Asian harvests.
The sugar year ending September 2017 saw the abolition of EU sugar beet production of quotas, the first time producers have been freed from marketing limitations since 1968. This will prompt a large increase in EU sugar production for 2017/18. The commission may have published incorrect sugar production figures in July, which would result in a carry forward of 1.4 million tonnes, rather than the 700,000 tonnes originally forecast. With EU sugar beet harvest having just begun, with high beet yields being reported in Germany, France, Poland and the Netherlands. In the UK domestic production is set to exceed 1.4 mln tonnes, an increase of 900,000 tonnes. Southern Europe has reported lower yields due to drought in the summer. The weather looks encouraging for Northern Hemisphere production. The EU production in 17/18 likely to exceed 20 mln tonnes, after an increased sown area by 16%, plus with the additional carry forward stock, there is real potential for the EU to start exporting onto the world market. Current world market prices are not attractive to European producers, who will try and sell their additional stocks to the southern deficit regions of the EU. The 2.3 mln tonnes of allowed imports from African, Caribbean and Pacific regions fell to 1.3 mln tonnes in 2016/17 and will continue to lose market share as a result of the change in EU policy. Although EPA/EBA countries will continue to benefit from quota and duty free access, the 15.7 mln tonnes required for food use will easily be met by locally produced beet sugar.
Russia & Ukraine
In Russia and the Ukraine the majority of beets has been harvested. Russia is estimated to produce 6.5 mln tonnes in 2017/18, an increase of 5% over last year. Ukraine has increased planted area by 8% for sugar beet, so sugar production for 17/18 is expected to surpass the 2 mln tonnes of 16/17. Combined sugar production from these two countries is estimated at 8.4 mln tonnes for 17/18. Europe will have a big surplus of white sugar over the coming 12 months. There will be pressure on producers to export their surplus sugar to avoid deflating prices in their domestic markets. With Russia and The Ukraine likely to export around 1.4 mln tonnes of sugar, there will be stiff competition from the EU for white sugar exports.
Harvesting which began in April continued to be disrupted in October due to heavy rainfall, slowing the crushing of the canes and reducing sugar content, but this will help improve the outlook for the ageing cane in 2018/19. The wet weather and lower sugar prices has incentivised millers to produce fuel until the end of the crop, with ethanol prices remaining strong. Fifty two percent of the 2017/18 crop will be processed into ethanol. Mills will start to shut down during the month of November. The latest estimate for the 17/18 sugar production is 36 mln tonnes.
The amount of rainfall this year has been perfect to benefit the cane crop. The dry season has begun ideal timing for the cane fields, ahead of the start of harvesting later in the month. Thailand is likely to produce a bumper harvest and increase sugar production above the 10.2 mln tonnes produced in 2016/17.
The cane harvest is just starting up after Diwali, a slight delay due to post monsoon rains. Sugar supplies during the festive period were not affected due to imports and the government managing lower prices by limiting stock kept by millers and traders until 31st December. The government is trying to incentivise farmers to plant more cane for the 2018/19 season after two consecutive years of low monsoon rainfall and planted canes, resulting in sugar production falling below consumption. With adequate monsoon rains this year and a delay to the harvesting of the 2017/18 crop and a record cane acreage for 18/19, India looks set to have a sugar surplus for the next two years. Estimates say the country will produce 25 mln tonnes in 17/18, up 25% on last year, subject to weather conditions. Interestingly the country’s sugar consumption is 24.4 mln tonnes.
Southern Africa
Swaziland traditionally a main supplier to the EU has suffered two years of drought, leading to strong local prices, so future sales will continue to grow in regional markets to replace exports to the EU. Rising domestic consumption will also absorb any additional sugar produced.
Harvesting which commenced in May reached its peak in August and is 72% complete, with crush finishing at the end of this month. The 2017 crop is estimated to be 8% lower than last year, due to drought in Queensland south and the effects for Cyclone Debbie in late March which affected a quarter of the cane crop in the central region. The rains however have improved the sugar content so it is possible that sugar production may match the 4.7 mln tonnes produced in 2016. Australia’s sugar consumption remains stable at 3.7 mln tonnes, with 3.7 mln tonnes being available for export, mainly to South Korea, Indonesia and Japan.
Seventy percent of Mexico’s mills have started an earlier crush due to more cane availability, with an early prediction of 6.2 mln tonnes, similar to 2015/16 crop. Mexican sugar stocks are 2% lower than last year, which will keep domestic prices high. Total exports to the US for 2016/17 were 1.2 mln tonnes with estimates for 17/18 projected at 1.7 mln tonnes. Hurricane Irma crossed Florida in September, affecting most of the cane growing areas. Battered canes have been stripped of leaves which affects growth and flooding affected most of the fields. Harvesting which usually begins in October has been delayed. Sugarcane production for 2017/18 is estimated at 2.0 mln tonnes due to lower sucrose recovery, this compares with 3.8 mln tonnes last year. Total US crop will be reduced this year to 3.8 mln tonnes, resulting in approximately 100,000 tonnes less sugar which will need to be replaced with additional Mexican quota. US beet production for 17/18 is estimated at 5.1 mln tonnes, with lower yields expectations in Michigan due to dry weather and wet weather in Minnesota.
Imports have fallen 38.9% to 2.29 mln tonnes for 2016/17 as higher tariffs has made world market sugar more expensive, after lobbying by domestic mills to support local industry. The area under cane planted for the 2017/18 increased by 3.4%, although this is smaller than first anticipated. The cane harvest is about to commence for the 17/18 campaign, with estimates of 11.2 mln tonnes of both beet and cane sugar being produced, compared to 10.1 mln tonnes in 2016/17. This will mean that China’s imports may rise to 6.0 mln tonnes in 17/18.

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Sugar Stocks To Return To A Surplus in 2017/18

May 12 2017

Market Position
Sugar prices traded around 16-17 c/lb during April compared to 19.5-20.5 c/lb last October based on the perception that world supplies will be sufficient in the 2017/18 season. If India imports white sugar before Q4 this year, the world market price will likely increase. If these imports are delayed, Brazilian and EU surplus sugar is likely to enter the world market, reducing world market prices. However, sugar imports into China need to be taken into consideration. Our prediction is that the market will remain bullish as a result of a two season global deficit in 2015/16 and 16/17, with the 2017 season looking tight on both raws and white trading flows. The global deficit for 2016/17 is 5.3 mln tonnes. Global sugar production for 2017/18 is estimated to increase to 190 mln tonnes based on predicted increases in production from the European Union, India and Thailand. This compares with 176.9 mln tonnes produced in 2016/17. The result will be a global sugar surplus of 2.8 mln tonnes for 2017/18, with global
consumption increasing by 2% to 184 mln tonnes. Prices are unlikely to drop due to low stock
levels, but they are also unlikely to increase significantly.

Wet weather in March delayed the sowing of beets in the Benelux, German and Netherland regions, although sowing is now 100% complete. The planted area is expected to increase
around 17% above 2016/17 season, potentially producing 20 mln tonnes (compared to 16.9 mln
tonnes in 2016/17) which would be the highest since 2005/06 and the first crop in five decades not subject to marketing limitations. Increases are expected also in Russia which produced 6.6 mln tonnes in 2016/17 and the Ukraine which produced 2.4 mln tonnes in 16/17. This could result in European production rising to 33.1 mln tonnes in 2017/18, the second highest since 1990/91. Currently, EU stocks have fallen to around 509,000 tonnes, significantly under the 1mln tonnes that resulted in special measures in 2010/11. However, the European Commission has withdrawn a proposal to reclassify some out of quota sugar destined for food and beverage producers prior to the market being quota free on 1 st October, after the sugar industry opposed the proposals. The European sugar industry supported by ACP countries say that there is enough sugar available until the next crop and that an increase on quota sugar prior to the reforms would only erode market prices, discourage preferential imports from ACP countries and stocks would rise excessively. Brazil’s import quota to the EU remains unfulfilled as a result of persistently low EU prises that have fallen below world prices in recent months. In the UK British beet growers have been guaranteed a minimum price of GBP 22 per tonne which could lead to sugar production of 1.4 mln tonnes for 2017/18, up from 1.0 mln tonnes in 2016/17.

Cane crushing began in April. A mixture of wet weather, lower available area and ageing canes
(on average 3.6 years old) with poorer yields has resulted in early estimates for a decrease in
sugar production in 2017/18 at 35.2 mln tonnes. However there is still plenty of time for changes to the Brazilian harvest as a result of weather, sugar yields (as the plantations are in a
satisfactory condition) and the sugar mix over ethanol. The reduction in gasoline prices is
making the production of ethanol over sugar less attractive and sales of hydrous ethanol have
become less competitive due to expired tax support measures. The mills have more funds now
to invest again which has resulted in a replanting effort in recent months. The month of May will see stocks start to build up in the ports. The global deficit for 2017 is relying on Brazil to over perform again, currently the country is not adding much to any global surplus with export
forecasts at 28.28 mln tonnes, down 400,000 tonnes on last year.

Dry weather is helping the 2016/17 cane harvest which began in December and is nearing completion. Sugar yields are up on last year due to ideal weather with plenty of rain during the
growing season. Sucrose extraction is up on last year at 11.08%, from an actual smaller crop.
To date the country has produced 10 mln tonnes of sugar compared to 10.2 mln tonnes in 2015/16. The government is planning on abandoning the current quota system for buffer stocks and also plans to relax domestic prices.

Uttar Pradesh cane crush has now come to an end with a smaller crop. Two years of reduced monsoon rains has reduced planted area in central India, resulting in a smaller yield with sugar
production for 2016/17 below consumption for the first time in seven years at 20.2 mln tonnes.
This is a drop of 4 mln tonnes over 2015/16 crop. The monsoon season forecast is rainfall at
96% of normal levels. The actual amount will impact on the 17/18 and 18/19 sugar production.
2017/18 harvest will commence in six months, production is expected to increase, but existing
stocks may struggle to meet consumption (24 mln tonnes) during the peak demand period of the year. A 500,000 tonne import quota for raw sugar was announced last month. Predicted tight stocks in Q3, will see white sugar imports required. These imports will directly affect the NewYork and London traded prices for sugar.

Southern Africa
Local market prices remain strong as a result of the drought during the last two seasons. The
2017/18 crop should be improved over the 1.5 mln tonnes produced in 2016/17 due to rainfall in

The cane harvest is expected to commence in the next couple of weeks. Cyclone Debbie which hit Australia’s cane growing regions last month may have affected up to a quarter of the cane crop as a result of winds up to 250km/h and heavy rains of up to 250mm, which has caused heavy flooding and damaged to several mills. Early estimates predict that sugar production will be 300,000 tonnes lower for 2017 at 4.8 mln tonnes. Consumption remains stable at 3.7 mln tonnes.

Mexico’s export quota to the US has increased to 1 mln tonnes as a result of reduced sugar
yields and shrinkage of beets stored from the US beet production in 2016/17 and tighter stocks to use ratio. The 2015/16 Mexican sugar production of 6.1 mln tonnes is unlikely to be matched in 2016/17 due to lower yields from the current crop, despite a higher harvested area. US beet production for 2016/17 is estimated at 4.9 mln tonnes, down from 5.1 mln tonnes in 2015/16. US cane sugar production for 2016/17 has also been reduced to 3.8 mln tonnes, due to reduced sucrose recovery by producers in Florida and Texas. US sugar imports have been raised to 375,000 tonnes.

The 2016/17 crushing season is nearing its end. Domestic sugar prices have fallen in recent
months, reducing the likelihood of the government selling strategic stock. Lack of clarity over
import quotas and a possible increase in duty rate has seen a lack of demand for imported raw
sugar, leaving border traders to ship more white sugar through Myanmar. China has been the
world’s largest sugar importer over the last couple of years, with 6.2 mln tonnes coming into the country in 2015/16. The concluded beet production for 2016/17 reached 1.0 mln tonnes up from 839.9,000 tonnes in 2015/16. Cane production is nearing completion and is estimated to
produce 8.2 mln tonnes of sugar, bringing the country’s total sugar output for 2016/17 close to
9.2 mln tonnes, compared to 8.7 mln tonnes in 2015/16. Domestic consumption is around 15.4
mln tonnes leaving a shortfall of 6.2 mln tonnes which will need to be filled with world market
sugar, mainly from Brazil, Thailand, Cuba and Australia.

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Jan 27 2017

Ragus Commercial Manager Frank O’Kelly toured the Berkshire Production Facility with Rob Evans Bako Wales Sales Manager, Richard Thomas Bako Wales Technical Sales Representative and Dyfed Evans Bako Wales General Manager. 
Representatives of the nationwide ambient, chilled and frozen food ingredients group spent an informative day at our Berkshire production facility, learning how Ragus manufacture the co-operative group’s Bako Select range of Golden Syrup and Treacle.
The complete manufacture of these products, developed and produced from Ragus’ own resources is based on our in-depth know how and talent, backed by a class leading level of service which the Bako Group have come to rely on for over 18 years of continuous national supply.
Bako Select range of handpicked products are all rigorously tested by their highly trained bakery and technical teams which only select the very best products which are delivered nationally in multi-temperature distribution fleet to allow a variety of ambient chilled and frozen products from the same vehicle to the nation’s bakers, coffee shops, confectioners, food manufacturers, hospitals and schools, all of who rely on exacting quality standards and service levels of supply.
Two of the many products supplied to Bako by Ragus Pure Sugars.

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