30th March 2020

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European Union Sugar Markets Update & Outlook

#FoodHeroes are keeping sugar supply chains running through Covid-19

Farmers in Europe are planting beet, cane cutters in African, Caribbean

and Pacific countries, Latin America and LDCs are cutting cane,

drivers hauling, and factory workers, chemists and engineers are

processing material to make sugar, ethanol (including for hand

sanitiser) and green energy; warehouse workers are storing, truckers

trucking, packers packing, fork lift drivers loading, office workers

communicating and administering, tens of thousands and more by

factors of ten people are continuing to work distributing, stacking,

manufacturing, commuting to work on over-stretched public transport

– all are working night and day to put food on our tables. Without

sugar there would be neither jam nor yeast nor bread.

COVID-19 has already taken too many lives prematurely and it has

also ravaged the financial markets. Sugar prices have fallen once again

well below average costs of production. This is neither sustainable nor

fair on our #foodheroes

Trade recovery will have to be at the centre of any financial recovery

plan after this emergency eventually subsides. We will need more

extensive Free Trade Agreements than ever before, including one

between the EU and UK. And we will need them fast. But they must

be fair trade agreements if they are to offer sustainable futures for all

of our #foodheroes Meanwhile, let's do all we possibly can — even

those of us working from home — to keep the tractors, forklifts, trucks

and ships moving, the ports open and cross-border sugar trade flowing.

Table of contents

#FoodHeroes are keeping sugar supply chains running through Covid-19 .................................... 1

World sugar market commentary ............................. 2

EU Commission reports average domestic prices up to EUR360/tonne .......................... 3

EU exports projected at just 750kt (excl. IPR) in 2019/20 ...... 4

EU imports projected to be 1,750,000 tonnes incl. IPR in 2019/20 .................................... 5

EU sugar stocks remain low but sufficient ................................... 5

Statistical annex ........................ 6

Disclaimer ................................. 7

EU Sugar Market Report and Update 30 March 2020

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World sugar market commentary

Before the COVID-19 crisis struck only a few weeks ago, ICE #11 May futures were trading above 15

cents/lb, nicely trending upwards on the back of constructive fundamental news. Last week, Green Pool said

it now expects a global sugar surplus in the 2020/21 season as the coronavirus pandemic dents demand

growth and the oil price war encourages a switch to more production of sugar in Brazil. And Czarnikow said

it has reduced its EU sugar consumption estimate by 700,000 tonnes for the rest of 19/20 due to the

coronavirus outbreak. On 27th March, the ICE May #11 raw sugar futures contract closed at 11.10 cents/lb,

down 30% in little more than a fortnight. Hence, based on the cost of importing raw sugar into the European

Union at zero tariff, refining it and making it available EXW in the EU markets (bearing in mind that

theorizing is always a dangerous game even at the best of times), the EU domestic sugar market ought to be

looking at a situation where EXW domestic prices are heading right back to where we were in the dark days

of 2017/18 after EU sugar production quotas were abolished, hence wiping out all EUR150/tonne of the

gains from the low EUR300’s to around the EUR450/tonne seen most recently in the north-western EU spot

markets (see below).

The calculation above is automatically updated every few hours at https://www.julianprice.com/flourish.html

The “macro” situation for global sugar can – perhaps – be encompassed in three measurements: the VIX

index, the USD Brazilian real exchange rate and the Baltic Exchange’s freight indices. For the European

sugar market, a fourth metric: the USD/Euro exchange rate may be added.

VIX USDBRL Baltic indices

Brazil remains the predominant exporter of sugar to the world market and hence the USDBRL exchange rate

remains the predominant forex pair for the global sugar markets. The USDBRL is a full R$1 weaker than a

month ago, currently around 5.10 as investors flee to the relative safety of the US dollar, and is about 20%

below its value at the start of 2020, which is translating into higher prices for Brazilian sugarcane farmers

EU Sugar Market Report and Update 30 March 2020

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and millers in reais. Hence in local currencies, the view of the world market is very different from a Brazilian

point of view or from a European point of view:

Both London and New York sugar futures prices in 35 differenct currencies for all contracts since 2000 are available thanks to the magic of Microsoft Power BI at https://www.julianprice.com/flourish.html Source: ICE (via Barchart) and ECB data.

The Baltic dry bulk indices are only a little higher than the recent lows and well below the all-time highs

seen in May 2008. Nevertheless, the freight market is very nervous with reports that some vessels open in the

Mediterranean, with Italy as the last port, were failed on subjects. The container indices are also relatively

stable, but there is an unprecedented number of reports of “blank sailings” — ships scheduled but which

never finish their journeys — since the coronavirus outbreak began, and hence the container market is far

from normal. On 18 March, Lars Jensen, CEO of Copenhagen-based Sea Intelligence Consulting, estimated

that the impact on container shipping lines from the coronavirus pandemic could cut out about 17 million

twenty-foot equivalent units (TEUs), or about 10% of global container traffic.

EU Commission reports average domestic prices up to EUR360/tonne

On 18 March, the European Commission reported that the EU average domestic white sugar price in January

2020 was EUR360/tonne for the EU28. The average prices in Regions 1, 2 and 3 were EUR368, EUR347

and EUR445 per tonne respectively. The average intra-EU sugar price was EUR419/tonne based on VAT

data.

European spot prices were said to be between 440 and 460 €/t in France, Belgium, Germany and the

Netherlands, around 510 €/t in the north of Italy, 530 €/t in the south of Italy and 535 €/t in Spain.

Looking ahead, it will be of huge importance for all participants to assess the impact of the coronavirus and

oil price war impacted global markets on EU domestic prices. As things stand today, it is clear that EU

domestic market prices are now trading well above “import parity” (see graph below), especially in the

peripheral deficit areas in Region 3 of the EU market.

…/over

EU Sugar Market Report and Update 30 March 2020

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EU reported prices and import parities (sources EC, ECB and ICE)

Link to larger graph above https://www.julianprice.com/mar20/euwpx.png

Link to larger graph above https://www.julianprice.com/mar20/dots.png

EU exports projected at just 750kt (excl. IPR) in 2019/20

Returning to matters of concern for the dwindling quantity of EU sugar exports, the upshot of the above

“macro” situation is that global demand for prompt white sugar has surged, and as a result, the May/May

white sugar premium has soared to well over US$100 per tonne.

For January 2020, the latest Eurostat data released on 18 March showed that the EU had exported 91,829

tonnes of sugar, of which 62,222 tonnes was exported under normal customs procedures to third countries,

bringing the total in the first four months of the 2019/20 marketing year to 467,015 tonnes including IPR

exports. The average FOB export price in January was EUR383/tonne, a premium of around EUR35/tonne

above the average ICE #5 H20 sugar futures price. Bear in mind that a large quantity of these exports are to

“premium” markets such as Norway and Switzerland (see statistical annex).

The monthly quantities exported in February and March and thereafter are expected to be lower and the total

of EU exports in the 2019/20 marketing year is now projected to be around 750,000 tonnes under normal

customs procedures and just under 1m tonnes including IPR exports.

EU Sugar Market Report and Update 30 March 2020

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EU imports projected to be 1,750,000 tonnes incl. IPR in 2019/20

According to Eurostat data released on 18 March, the EU28 imported 223,966 tonnes of sugar in January

under normal customs procedures and 34,598 tonnes under IPR, bringing the total in the first four months of

2019/20 to 915,192 tonnes. Notable imports in January included the following quantities of bulk raw sugar

for refining:

Origin Quantity tel quel CIF import price (€/t)

Swaziland 26,531 356

Brazil 59,093 305

Mozambique 14,979 315

Nicaragua 23,610 346

Based on current trends, the total of EU28 imports in 2019/20 is expected to amount to 1,750,000 tonnes

(including IPR).

EU sugar stocks remain low but sufficient

EU Sugar Market Report and Update 30 March 2020

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Statistical annex

Top ten EU sugar export destinations

ACP, LDC and South African sugar imports

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EU IPR sugar trade

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