Global sugar market report February 2022

It has been six months since the last Ragus global sugar market report. In that time, we have seen the world almost recover from the COVID pandemic, with more businesses up and running and global sugar consumption increasing as a result. However, with new COVID variants bringing more challenges, we have examined all aspects around sugar from consumption, production, weight, price and import/export, explaining the key factors that impact the market landscape.  

World market prices continue their steady rise, ending 2021 at 18.88 c/lb compared to 15.49 c/lb a year ago. Prices peaked in November at 20.69 c/lb as Brazil’s harvest continued to underperform. For the 2021/22 season, the global sugar market will be in deficit for a third year in a row at minus 3.9 million tonnes, compared to the deficit of 1.4 mln tonnes in 2020/21. This will be a stimulus for higher sugar prices.

The new COVID variant, Omicron, slowed down global recovery and sugar consumption. Harvests from India and Thailand produced better results than expected, however, a weak Brazilian real helped slow the inflation in sugar prices. The market is still waiting to see if India and Thailand can fill the deficit caused by lower production in Brazil.

The global production in beet sugar for 2021/22 is estimated to rise to 40.4 mln tonnes compared to 37.9 mln tonnes in 20/21, whereas global cane sugar production is estimated to fall to 143.5 mln tonnes. Early indications for these global sugar productions in 21/22 is 183 mln tonnes with global consumption rising to 184.4 mln tonnes, from 181.3 mln tonnes in 20/21. So as the global economy recovers from the COVID-19 pandemic, this should leave a 21/22 projected global deficit of 3.4 mln tonnes, taking into account global stocks.

European Union beet sugar production is set to rise to 17.2 million tonnes for the 21/22 campaign due to significantly better yield recovery in the largest producer countries of France, Germany and Poland, despite a smaller area under beet cultivation. This compares with 15.5 mln tonnes in 20/21, a significant increase.

Good growing conditions in the spring and summer of 2021 helped with beet development across Europe, including the UK. And although reduced summer sunshine hindered the development of the beet’s sugar content, the relatively cold winter will extend the average beet campaign across the continent. Drier weather during the summer of 2021 meant rain that can lead to disease had not been an issue.

The approval to use neonicotinoid treatment of beet seeds, despite original prohibitions in 2018 to protect bees, meant the 2021 crop saw fewer cases of the beet yellows virus. In 2022, we expect to see a small rise in the number of beets planted, due to improved market pricing. With continued approval of neonicotinoid treatment for the 2022 crop in 10 EU states as well as the UK, 2022 and 2023 is likely to remain in deficit and will have to rely on imported sugar to meet the demand.

In the UK, British Sugar and the National Farmers Union (NFU) have agreed to set beet prices at GBP 27 per tonne, with 3-year fixed agreement set at GBP 25 per tonne. On 16^th December 2021 the UK and Australia signed a trade deal that will see a duty-free quota of 80,000 tonnes of Australian cane sugar enter the UK in 2022. This amount will increase by 20,000 tonnes every year for an eight-year period, after which there will be no restrictive tariffs.

On the 31^st December the government also announced an extension to the TRQ duty free import quota for raw cane sugar of 260,000 tonnes until 31^st December 2024. At the beginning of this year the UK government stated that negotiations on an ambitious Free Trade Agreement with India are underway, with sugar likely to feature in discussion.

For 2020/21, the UK imported 212,211 tonnes from EPA/EBA countries, a consequential decrease compared to the 317,947 tonnes in 2018/19. Brazil, who’s part of the tariff-rate quota (TRQ) became the UK’s largest raw sugar supplier, with 161,334 tonnes imported in 20/21. So, by the end of 2020, total sugar imports into the UK was 526,000 tonnes.

Favourable weather and a 9% increase in acreage helped beet development during the summer, with Russia’s beet harvest rising by 22% for the 21/22 crop. Average beet yield has also increased by 13%, although the extraction rate is down on last year.

We estimate that the resultant sugar being produced for 21/22 will reach 5.7 million tonnes, compared to 5.2 mln tonnes in 20/21. This is down on the 7.86 mln tonnes produced in 19/20, but in line with domestic consumption. Looking ahead to 22/23 we predict that beet sowing will increase by around 5-10% this spring, which could see sugar production grow to 6.5 million tonnes.

Domestic consumption remains around 5.7 mln tonnes. In the Ukraine a 12% increase in beet acreage and better sugar extraction rates resulted in beet sugar production for 21/22 slightly up at 1.2 mln tonnes, which compares with 1.1 mln tonnes in 20/21.

Sugar production in Brazil’s centre south region came to a complete halt in the second half of December, following dry weather and multiple frosts in July which damaged the canes.

The harvest – which began back in April 2021 – is now 12.7% down compared to this time last year, with sugar production down 16.1%. Total sugar production for 21/22 is estimated at 36.33 mln tonnes, down from 43.3 mln tonnes produced in 20/21. Ethanol production is also down by 9.3% compared to last season.

Rainfall in December and January improved cane development, but cane crushing is likely to be delayed beyond April this year. High oil prices and a stronger Brazilian real would entice millers to divert more cane to ethanol. This would reduce sugar supplies and could have an impact on the global sugar market.

The cane harvest began later than usual and as per last year, commenced in early December. The last two years have seen a significant reduction in sugar produced, but improved rainfall throughout 2021 will see the recovery of cane sugar yields in 21/22.

Due to stronger sugar prices, farmers have now switched back to growing sugar cane from cassava. Early crushing results have been encouraging and if the current pace continues, we expect around 10 million tonnes of sugar to be produced. This is up from 7.7 mln tonnes in 20/21 and 8.5 mln tonnes in 19/20, though still significantly lower than the 14.9 mln tonnes produced in 18/19.

India exported a record 7.1 mln tonnes in 2020/21, compared with 6 mln in 19/20. Strong cane yields at the tail of the 20/21 harvest enabled sugar production to reach 31.1 million tonnes. With domestic consumption at 26 mln tonnes, these figures have allowed stocks to be further reduced.

India’s ethanol production continues to rise, using up molasses that would previously have been used for sugar production, with 2.1 million tonnes of sugar equivalent diverted for ethanol production. By 2025 the country intends to use as much as 6 mln tonnes of sugar for ethanol production. For 21/22 India’s sugar production is estimated to reach to 33.5 mln tonnes.

Egypt’s 21/22 sugar cane harvest began last month and will continue until June. The intention is to produce 1 million tonnes of cane sugar this season and 2 million tonnes of beet sugar, with the beet campaign starting in April.

The country consumes 3.3 mln tonnes of sugar annually. African sugar production for 21/22 is expected to reach 12.6 mln tonnes, compared with 9.6 mln tonnes in 20/21, due to the increased production in Egypt.

A larger cane crop in South Africa is expected to produce 2.2 mln tonnes for 21/22, compared to 2.0 mln tonnes in 20/21 – a reduced figure compared to our last report in July. This is due to frost-damaged canes and civil unrest causing mill closures.

Eswatini and Swaziland is expected to produce 750,000 tonnes of cane sugar after plentiful rainfall and improved irrigation.

The 21/22 Australian cane harvest began in June with extraction rates declining towards the end of the harvest in late December. This was due to unseasonal rainstorms.

With the harvest now complete, early estimates report a slight increase in sugar production at 5.15 mln tonnes, up on the 4.4 mln tonnes produced in 20/21.

The United States is set to produce a record amount of sugar in 21/22, reaching 9.3 mln tonnes, compared to 9.2 mln tonnes in 20/21. The current record is 9.292 mln tonnes which was produced in 17/18.

The tail of the sugarcane harvest in Louisiana and Florida is strong with canes producing a high sucrose content. The beet campaign also continues to increase. US stocks remain up on this time last year, so the country is expected to import slightly less sugar, at around 2.8 mln tonnes.

The 21/22 Mexican cane sugar harvest began in November – slightly later than last year – and is expected to last until July. Cane yields are reported to be up, with extraction rates the same as the previous year. Last year Mexico produced 5.8 mln tonnes of sugar with the harvest finishing at the end of July.

After last season’s beet sugar record of 1.5 mln tonnes, the 21/22 campaign, which is due to end next month is predicted to be below 0.9 mln tonnes, the lowest for five years.

Cold weather in the autumn affected beet development and – as mentioned in our last report – many farmers have switched to growing corn due to much better pricing returns.

Wet weather in November hampered the cane sucrose content and as January is the height of China’s cane harvest, the current sucrose extraction rates are poor. If this continues, cane sugar production may fall below 9.0 mln tonnes for 21/22 compared to 9.1 mln tonnes in 20/21, bringing China’s total sugar production in 21/22 to 9.9 mln tonnes.

Interestingly China’s domestic consumption is 15.6 mln tonnes, but China has already imported 7.1 million tonnes of sugar in 21/22 which is way above the quantity needed to offset the decline in domestic production.

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