Analysis Sugar
Germany expects significant increase in sugar production
The sugar production in Germany is expected to rise well above the five-year average. This is despite the fact that the growing season in the country did not go smoothly everywhere. Sugar prices have risen significantly towards the end of August due to major news from Brazil.
The sugar production in Germany is expected to reach 4.77 million tons in the upcoming season 2024/25. This was reported by the German sugar association WVZ monday (September 2) in the first harvest forecast of the season. The production is more than 13% higher than last season, when according to the association, 4.22 million tons of sugar were produced. The production is also higher than the five-year average of 4.21 million tons.
The significant increase in production can be partly explained by an increase in the sugar beet area. This increased from approximately 364,500 to 385,600 hectares, a rise of 5.7%. On the other hand, the production increase can be explained by an average sugar content and a good yield thanks to the abundant moisture and sufficient sunshine during this growing season, as explained by the association based on field samples. They estimate the yield at 81.9 tons of beets per hectare, 12% more than the five-year average in Germany. The sugar content is now estimated at 17.2%. Nevertheless, the growing season was not easy and has been challenging so far. There were delays in planting due to the wet spring, and the infection pressure from leaf diseases was high.
Improved sugar production
Sugar prices in Europe, as well as in the rest of the world, have been under pressure for some time. This is evident in the sugar price in London, where the white sugar contract almost reached the level of $500 per ton last month. Improved production expectations are one of the reasons. The sugar cane fields in Asia are in much better condition than last season due to favorable growing conditions, allowing for increased sugar production. On a global scale, the production in that region is much larger and therefore more influential. The Indian Sugar Mills Association (ISMA) announced that it is no longer necessary to maintain restrictions on the export of the sweetener. The signals are also positive for sugar production in other parts of the world. In Europe, sugar beets are on track according to yield estimates from the European Commission and the Joint Research Centre. Additionally, there is an expansion of acreage in various countries, as described above in Germany. According to the European Commission, several member states planted later, but then experienced favorable growing conditions that led to good beet development. The Netherlands seems to have faced the most challenges in sugar beet cultivation.
Drought in Brazil
In Brazil, on the other hand, the production and expectations are heading in a completely different direction. The country is by far the largest sugar producer and exporter in the world and therefore has a significant impact on global sugar prices. The production season and sugar cane harvest started smoothly and even ahead of the record year of last season. However, according to the latest figures from the Brazilian industry association Unica, production has decreased somewhat in the month of August. This was already predicted, but in combination with the ongoing drought, production may decline faster than previously expected.
Inferno on Brazilian sugar cane plantations
In some regions, it has been too dry for several months, reports Unica. Various sugar traders and producers indicate that sugar cane cultivation is suffering, and this will not only affect the current season but also the 2025/26 season. Moreover, the drought has led to massive fires in the main sugar production region of Brazil. Large areas of sugar cane have been lost to the flames. Estimates of the lost acreage vary, and the exact damage is yet to be determined, but according to the sugar cane growers association Orplana, 80,000 hectares have been burned, as reported by Reuters. This is more than 1% of the sugar cane acreage in the largest production region. The ongoing drought is also leading to lower sugar cane yields in other parts of the region.
As a result, sugar prices in London and New York surged at the end of August. The raw sugar contract in New York rose by over 10% to $438 per ton. The white sugar contract in London rose less sharply by 6% and reached $557 per ton at the end of August. The white sugar contract has since dropped slightly and is currently trading at $544 per ton at the time of writing.
Cosun sees challenging sugar market
Cosun Beet Company also explains that the sugar market is evolving differently than previously thought and therefore needs to adjust again. The beet processor notes that volatility has increased in the sugar market and observes that sales volumes this summer were lower than expected. As a result, inventories are rising, and pressure on prices is increasing. Cosun expects to sell a lower volume of sugar in 2025 and 2026. Based on this, it has been decided to reduce the planned allocation rate of 105% for 2025 and finalize it at 100%. The allocation rate for the current campaign year 2024 is and remains at 110%. In July, Cosun had already issued a similar announcement and adjusted the allocation rate from 110% to 105%. Now, one and a half months later, it has been reduced by another 5%.
Cosun uses member supply rights (LLBs), where 1 LLB entitles the right to deliver 1 ton of beets (at 17% sugar) at the member price. An allocation rate of 105% means that a grower can deliver 5% more beets at the member price. If more than 105% of beets are delivered, a lower price is charged for that volume.
