Sweet Turmoil: Why EU Sugar Prices Are Rising Amid a Global Oversupply

Sugar Market Report – Developments in the EU and Global Markets (As of November 28, 2024)

Global Market Overview (ICE Prices)

The global sugar market, as reflected by ICE Sugar No. 5 prices, has seen a downward trend across all observed contracts. This reflects general uncertainty and pressure from an oversupplied market despite steady demand.

ICE Sugar Prices (as of November 28, 2024):

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Developments in the EU Market

The EU sugar market has experienced mixed trends:

1. Price Increases in EU Sugar:
   • Current prices for Category II sugar (FCA, EU) range between €0.50 and €0.53 per kg, reflecting a moderate upward trend.
   • Some market participants expect further price increases due to higher production costs and reduced margins.
2. Impact of Ukrainian Sugar:
   • Starting in January, a limited quantity of Ukrainian sugar will be imported into the EU duty-free—current prices for Ukrainian sugar stand at €0.42 per kg (FCA).
   • While transport costs diminish its competitiveness, reports suggest some offers as low as €0.40 per kg. However, low prices may lack proper certifications, specifications, or analyses.
3. Oversupply and Market Dynamics:
   • Despite rising prices, the EU sugar market remains oversupplied. This surplus and the incoming Ukrainian sugar are expected to stabilize the market in the medium term.

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Market Influences and Risks

1. Price Link to ICE:
   • EU producers typically benchmark their prices against ICE with a small discount of €0.01–€0.02 per kg. This connection creates additional pressure as global prices decline.
2. Transport and Certification Issues:
   • Ukrainian sugar faces high transport costs and concerns over compliance with EU standards, particularly for the cheapest offers.
3. Demand-Supply Balance:
   • The market may soon realize there is more than enough supply, potentially leading to price corrections.

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Outlook

• Short-Term: Prices in the EU will likely remain elevated as tighter supply expectations persist.
• Medium-Term: The anticipated entry of Ukrainian sugar and recognition of an oversupplied market could put downward pressure on prices.
• Long-term: The alignment of EU and global prices may depend on market adjustments and the resolution of logistical and certification challenges.

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Conclusion

The sugar market in the EU is paradoxically facing rising prices amidst ample supply. Global benchmarks, logistical hurdles, and certification issues will continue to shape market behaviour. Buyers and stakeholders must remain vigilant about the origin and quality of their purchases to ensure compliance and value.

Note: This report is based on the latest available data and may be subject to updates based on future market movements.