Average EU white sugar prices have continued to drift upwards to new record highs, reaching 鈧�817/t in June 2023. With the vast majority of sugar in Europe sold on contracts at prices agreed pre-campaign or prior to the start of the calendar year, this is not surprising but nonetheless underlines the exceptionally high price level in the market.
皇家华人continues to hear of prices for 2023/24 being agreed around the 鈧�1,000/t mark for sugar sales in the UK, while sugar for the remainder of this campaign is reported to be very difficult to obtain.
Despite homegrown 2022/23 sugar production being around 350,000t lower than 2021/22, imports of raw sugar for refining are on track to be only c.80,000t higher based on the rate of imports over the first 8 months of the campaign.
No raw sugar for refining has been imported yet in 2022/23 from any ACP/LDC origins with duty-free and tariff-free access according to HMRC data, suggesting a complete displacement of these traditional suppliers with world market raw sugar following the UK Government鈥檚 changes to trade policy in recent years.
As shown in the graph below, imports continuing at the same rate as the past few months would leave sugar supply in the UK approximately 200,000t shorter than last year and well below normal levels.
Average prices of white sugar imported into the UK have increased in line with reported EU average prices, which is likely to be reflective of white sugar prices sold in the UK. However, the average value of raw sugar imports has risen by far less (see figure 2), even accounting for CXL duties (c.拢82/t) being paid on a proportion of this, implying a substantially larger than usual refining margin being made on the raw sugar that is being imported.
A trader's view
NFU Sugar Board appointee and sugar trader Paul Harper shares his thoughts on the current market situation.
NFU Sugar Board appointee Paul Harper
Paul has spent his entire career in commodities and has been in sugar since 1976. He joined C Czarnikow in 1973 working in their London, New York and Singapore offices. Paul has a huge amount of consultancy experience, having consulted for a hedge fund, major bank and a large trade house in sugar during that time.
During the period under review, the raw sugar market has been treading water whilst the white sugar market has held steady following continued strong demand.
The white sugar premium rose to $170/t over raw sugar before easing back. The beet price on the futures linked contract also rose again towards the 拢60/t level before declining slightly.
Estimates for the global supply and demand figures in 2023/24 are already suggesting a deficit of around 1Mt and with little expectation of any major increase in supply the market, over time, is likely to reflect this with higher prices.
The world is likely to continue to be reliant on Brazil for a major portion of its supply, with India and Thailand both likely to have less sugar available for export. If white sugar premiums remain high, as expected by many people in the trade, then this could eventually bring more raw sugar demand from standalone refineries, aiding the possibility of higher prices, particularly on the raw sugar market.
The current strength of the dollar has encouraged some long liquidation from the funds and further strength in the currency may lead to lower prices in the very short term. However, lower prices are likely to uncover demand that has almost certainly been deferred. Therefore, the downside continues to remain limited.
The beet price on the futures linked contract is trading just above 拢56/t at the time of writing.