Scarce EU sugar supplies push up prices as farmers stop planting and import costs climb

01 May 2023 --- A few months after European sugar producers warned of a devastating blow to the beet sector as the Court of Justice of the EU stopped emergency exemptions for seeds treated with neonic insecticides, sugar prices are now, on average, 61% higher than one year ago across the EU, according to Eurostat data.

And the situation could get even worse. 

Farmers could be driven out of business if the EU continues with its plans to reduce pesticide use, as a loss of yields could wipe out farmers’ margins.

That is the concern from Max Schulman, vice-chair of working party seeds at Copa-Cogeca, who says that if “no effective [plant protection] alternatives are available, supply chains will crumble, ultimately leading to the disappearance of local European products.” 

“The effects are already showing: 10% of French farmers decided to stop growing beet this year, notably due to the lack of availability of neonicotinoids,” he stresses. 

“Sugar beet cultivation will become impossible in many areas in Europe if further active substances disappear. The European Commission must opt for an agricultural policy that ensures the security of supply for the European population and enables sustainable production of local food products,” adds Markus Schöberl, president of the Austrian Sugar Beet Growers Association.

In January the Court of Justice of the EU stopped emergency exemptions for seeds treated with neonic insecticides.Urgent political action
Sugar supplies are predicted to reach alarmingly low levels in September, which will cause “critical shortage situations leading to dramatic economic consequences, such as factory closures and job losses,” according to Cius, the association representing European sugar users.

Cius is calling for the EU to suspend its white sugar import tariffs immediately.

“Our high value-added sugar-containing products are losing exports as they are unable to compete with operators on the world market,” highlights the association.

Cius explains that “the ending stock forecast for the current agricultural year 2022/23 shows sugar levels available for users at 552 metric tons,” which represents less than two weeks of EU sugar users consumption.

Global sugar struggles
As the EU suffers a slump in production, it becomes more reliant on sugar imports that have become ever more expensive due to bad harvests caused by droughts. 

The Food and Agriculture Organization (FAO) of the UN signaled last month that sugar commodity prices are at their highest level since October 2016. Mostly due to declining production prospects in India, Thailand and China, three of the five largest sugar producers in the world.

India might implement a new sugar export limit in the upcoming weeks, as it did last year, due to its top-producing region cutting output estimates to 10.5 million metric tons, slashing forecasts by over two million metric tons in the last four months.

“Additional sugar export quotas are unlikely to be allowed,” said Sanjeev Chopra, Food Secretary of the Agriculture Department of India.

UK Emergency measuresBrazil’s sugarcane harvest is starting to reach global markets, which will offer some price relief.
UK authorities granted emergency authorization for the use of neonicotinoids in sugar beet in January. However, this has not prevented sugar prices from skyrocketing in the country as the National Farmers’ Union and British Sugar agreed last June, a sugar beet contract for 2023/2024 with a 48% price increase from a year earlier.

The UK also suffered from “adverse weather conditions” during the 2022 growing season, according to British Sugar. The organization expects the shortages to continue in the next month and will offer a premium for farmers to harvest some sugar beets earlier than usual in September. 

Brazil to the rescue
Brazil’s sugarcane harvest is starting to reach global markets, which will offer some price relief.

“The positive outlook for the sugarcane crops in Brazil, about to be harvested, limited the upward pressure on world sugar prices. The decline in international crude oil prices, encouraging a greater use of sugarcane to produce sugar in Brazil, coupled with the weakening of the Brazilian real against the US dollar, contributed to limiting the month-on-month increase in world sugar prices,” explains FAO.

However, Brazil’s Energy Minister, Alexandre Silveira, said last Friday that the country is studying to raise the mandatory blend of ethanol content in gasoline to 30% – up from the current 27%, – which would reduce the available sugar for exports. 

If crude oil prices tick up, food producers might be tempted to turn their crops into fuel, further worsening the current food crisis. 

By Marc Cervera