EU prices falling but trade figures point to stock drawdown – NFUonline
EU average white sugar prices have continued to drop, with the average sales value reported at €580/t in Dec-24, €276/t lower than a year ago.
In a sign of the comfortable supply situation in the EU market for 24/25, spot prices are reported even lower, with the latest EU Commission data showing spot sugar sales achieving c.€80/t less than the average return (see figure 1).
The EU sugar market tends to be a good guide to trends in UK sugar prices, which are not reported.
This comes on the back of a rebound in production in the EU combined with the highest opening stock levels since 2020 – together, this ‘readily available’ sugar supply was the highest reported by the EU Commission since it began reporting EU27 statistics (figures before 2020/21 include the UK so are not readily comparable).
The UK market is likely to have been in a similar position, though the data are not reported.
EU sugar imports lower
As a result, EU sugar imports (excluding IPR) have been very low compared to previous years – 135kt in Oct-Jan (a quarter of which is from the UK, supplying Ireland for example) – and exports higher – 526kt in the same period.
If the full year reflects these first four months, net exports would exceed the EU Commission’s forecast of c.1Mt by about 100Kt.
For 2025/26, the volume of net exports out of the EU matters because it directly impacts stock carry from this campaign into next.
The EU market came into 2024/25 with the highest opening stock level since 2020/21, so although a significant area cut is anticipated across Europe in 2025, a high stock carryover (which is readily available and needs to be cleared for new production) would put pressure on processors to sell and therefore could be a drag on prices.
On the other hand, a lower stock carryover would accentuate the impact of reduced production next year.
The EU Commission forecasts stocks drawing down from 2.1Mt to 2Mt, but this would still be above the five-year average carry in stock level of 1.8Mt – however, any additional net exports compared to their forecast could lower this figure.
The big unknown is consumption.
Consumption has been slightly falling in recent years in the EU for many reasons, but some forecasters, such as Globaldata, project an increase in 2024/25. If this were to happen, it would further tighten the supply picture ahead of 2025/26 (GD forecast a carryover of 1.6Mt, for example).
World sugar prices fall
On the world market, prices have fallen and rebounded in the past month (read more from Paul and WABCG below).
A lot has been made of the positions of speculative funds, with the funds holding their largest net short in five-years (see figure 2).
This means that traders in the futures market without a need for physical sugar hold, on balance, a large number of sold contracts, so will need at some point to buy back these positions to avoid ending up with sugar delivered.
As Paul notes, an impact of this could be to further increase the sugar futures market price before the March 2025 contract expires.
However, the flipside of this is that producers in the market have hedged an unusually low amount of sugar to date, while purchasers are well hedged comparatively.
This could have the opposite impact on prices later in the year, as sugar producers in the world market will be expected to sell or hedge their production at some point. With physical buyers potentially already better hedged, the pressure could be higher on the selling side of the market in this scenario, hence the risk to prices.
Fundamentally, however, as noted in both pieces below, the bigger impact of prices later in the year could well come from crop results in key producers like Brazil and India, especially if these differ from what the trade is currently expecting.
A trader’s view
NFU Sugar Board appointee and sugar trader Paul Harper shares his thoughts on the current market situation.
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