Quota Exhaustion and Export Restrictions

Ukrainian sugar producers have reached their annual export quota to the European Union in less than five months, prompting a search for new markets. The National Association of Sugar Producers of Ukraine, Ukrtsukor, has proposed halting exports to the EU until 2025. The Cabinet of Ministers has responded by introducing a zero quota for sugar exports to Europe starting June 1, though other markets remain open for Ukrainian sugar.

Increased Production and Export Potential

• Despite the restrictions, Ukraine’s sugar export potential stands at approximately 1 million tons.
• The need for new buyers is pressing, especially as farmers have increased the area for sugar beet sowing.
• This year, Ukraine delivered 283,000 tons of sugar to the EU, exceeding the 262,000-ton quota.
• As a result, Ukrtsukor has urged the government to set a zero quota for 2024 to meet trade agreement obligations with the EU.

Quota, at least 350,000-450,000 tons

Ukraine's initial foray into the European sugar market was rocky due to uncoordinated efforts by various companies, leading to a price collapse and dissatisfaction among European producers. Ukrainian producers are now striving to comply with EU requirements while hoping to increase the quota to at least 350,000-450,000 tons by 2025.

Distribution of Quotas Among Producers

A significant issue is the distribution of the quota among sugar producers. A proportional distribution based on production is considered logical to prevent companies from rushing to sell their products and consequently lowering prices. Some experts suggest that the quota should be allocated based on average production data from the past three years.

Production and Consumption Data

In the 2023/24 marketing year, Ukraine produced 1.8 million tons of sugar, with an average price of UAH 23-24/kg at the start of 2024. Domestic consumption needs are up to 1 million tons, with the Memorandum setting a maximum export volume of 650,000 tons.

Exploring New Markets

The European market remains attractive for Ukrainian exporters due to favorable prices and logistics costs. After exhausting the EU quota, exports will target non-EU countries, particularly Montenegro, Macedonia, Bosnia and Herzegovina, as well as Mediterranean and West African nations. Plans are also in place to restore supplies to the Middle East and Asia, regions that were actively served until 2022.

Logistics Challenges

Exporting to Asian and African countries poses challenges due to unpredictable logistics, risks, and high delivery rate volatility. Issues with shipments from Odesa ports might be alleviated by establishing a ferry route between Chornomorsk and Georgian Poti or a road route through Georgia, Bulgaria, and Türkiye. Sugar export through the Baltic Sea is also being considered.

Increased Sowing and Potential Surplus

In 2024, Ukrainian farmers increased sugar beet sowing by 21% due to the decreased profitability of grain cultivation. Factories now question their ability to process all the beets grown, leading to expectations of a sugar surplus both globally and domestically in 2024. This surplus, coupled with strong competition from Brazil, which is set to increase its sugar production to a record 46.292 million tons, is likely to drive prices down.

Outlook for Ukrainian Sugar Exporters

The anticipated global surplus and subsequent price drop will challenge Ukrainian sugar exporters in finding new buyers, especially given the EU supply restrictions. Ukrainian producers will need to innovate in logistics and focus on profitability and product quality to remain competitive.

The Ukrainian sugar industry faces significant challenges ahead with the exhaustion of the EU quota and a potential global surplus. Strategic planning, improved logistics, and a focus on quality will be crucial for navigating this complex market landscape.