At the end of September, raw sugar futures prices in New York reached almost 25 dollar cents/lb (24.94c/lb), before falling back to around 21c/lb. This followed adverse weather events in Brazil and India. Analysis in the industry press appears to agree that current high world market prices for both raw and white sugar are likely to continue in the short term. In September, Czarnikow revised its earlier projection of a six-million-tonne deficit on global sugar supply up to nine million tonnes and pointed out that ‘with no reserves left globally … price will need to ration demand in 2009/10’.
EU sugar prices are however following a contrary trend, with average white sugar prices in the EU continuing to fall (reaching a low of €551/tonne in February 2009), and the average price paid for ACP raw sugar and white sugar falling to €456/tonne and €515/tonne respectively by March 2009. These average prices contrast markedly with the €522/tonne and €629/tonne paid for ACP raw and white sugars in March 2007. With a further reduction in the EU reference price having taken place on 1 October 2009, further declines in the prices paid for ACP sugars are expected in the coming months.
SKIL reports on its October 2009 news page that with world market prices at high levels and the EU reference price having been further reduced, some ACP suppliers have found that ‘it doesn’t pay in the short term to sell to Europe’. While ISO had earlier ‘been predicting that ACP and least developed countries would increase exports to Europe from the current 1.9 million tonnes to about 3.4 million by 2014 … it is now starting to rethink’ this projection.
Meanwhile, as part of its long-term strategy, Mauritius has shifted over to the export of refined sugar and and/or value-added speciality sugars and a system for the full exploitation of sugar cane for electricity co-generation and ethanol production. Efforts are now under way to ensure that Mauritian sugar cane farmers benefit from all of these new revenue streams.
Bloomberg.com, 29 September 2009
http://www.bloomberg.com/apps/news?pid=20601091&sid=aZ3RilmXA2lg
Forbes.com, 29 September 2009
http://www.forbes.com/2009/09/29/sugar-soft-commodities-markets-equities...
Bloomberg.com, 28 September 2009
http://www.bloomberg.com/apps/news?pid=20601102&sid=a_SSBVzh7nIU
EC, EU sugar price trends, June 2009
http://circa.europa.eu/Public/irc/agri/olive-oil/library?=/sucre/public_...
SKIL, Latest Industry News, October 2009
http://www.sucrose.com/news.html
IPS, 14 October 2009
http://allafrica.com/stories/200910140979.html
At current rates of exchange between the Euro and the US dollar and with world market prices for raw sugar above 20c/lb, the guaranteed price for EU sugar is now below the world market price (when the c.i.f./f.o.b. differences are taken into account). Prices for ACP raw sugar on the EU market will in this context largely be determined by the supply-and-demand balance within the EU, rather than price guarantees as such. While SKIL has suggested that some ACP suppliers have found that ‘it doesn’t pay in the short term to sell to Europe’, the EU market is still likely to prove attractive to many ACP exporters, since it offers a more securely priced market up to October 2012, when price guarantees for ACP sugar will finally be abolished.
A number of these ACP suppliers are seeking to exploit the current supply-and-demand situation on the EU market to negotiate premium prices above the guaranteed price, with these prices being locked in on a multi-annual basis up to October 2012. However, with world market prices above 20c/lb, it looks as if the era of substantial EU market price premiums is coming to an end.