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Europe’s sugar output is set to fall to the lowest in more than a decade as hot weather damages an already smaller beet crop, tightening global supplies under pressure from a powerful El Niño.
Production in the European Union and the UK is set to fall to about 15 million tonnes, the lowest level since the 2015 season, according to data from S&P Global Energy. A series of heat waves this summer have battered yields for the current season after acreage had already declined for a second straight year as producers curbed output after bumper crops depressed prices.
That adds to mounting concerns about a potential worldwide deficit as the El Niño weather pattern looms over cane production in several key Asian producers including India and Thailand. That fear has already sent sugar futures in London and New York up about 5% so far this month.
«The lower crop will contribute to deficits in the first and second quarter of next year and that’s already being priced in the market», — said Claudiu Covrig, lead analyst at Covrig Analytics. With exports from Europe missing or at least reduced to a minimum, “prices will go further north”.
The European Commission’s MARS crop-monitoring unit last week cut its forecast for EU beet yield to 76 tonnes per hectare, down 7% from a year earlier, citing unfavourable weather.
While that’s near the five-year average, the prolonged heat has eroded any cushion for the crop, potentially pushing the EU to turn into a net importer of the sweetener, StoneX analyst Pedro Antiquera said in a note.
The outlook could deteriorate even more as weather forecasts continue to point to above-normal temperatures and limited rainfall, worsening already depleted soil moisture levels, according to principal analyst for soft commodities at S&P Global Energy.
Covrig Analytics has cut its output forecast for the EU and UK to 14.7 million tonnes, the lowest since 2022 when high temperatures hurt output and sent prices soaring. The European Commission expects output in the EU alone to slip to 14.1 million tonnes.
With acreage continuing to contract, the sugar beet crop has become increasingly vulnerable to yield shocks. Prices are expected to increase in the near term as the supply-demand balance tightens.
That could be a silver lining for European processors after two consecutive bumper harvests when the region was awash with sugar and a price slump squeezed their margins.
Sugar prices in the region have risen as much as 9% since June. Still, a sustained recovery for processors will require a further reduction in supplies because Europe could still produce a small surplus, Stephan Büttner, chief executive at Austrian sugar producer Agrana, said in an earnings call last month.
More details: https://theedgemalaysia.com/node/813696