Europe’s sugar output is set to fall to the lowest in more than a decade as hot weather damages an already smaller beet crop, tightening global supplies under pressure from a powerful El Niño.
Production in the European Union and the UK is set to fall to about 15 million tons, the lowest level since the 2015 season, according to data from SandP Global Energy. A series of heat waves this summer have battered yields for the current season after acreage had already declined for a second straight year as producers curbed output after bumper crops depressed prices.
That adds to mounting concerns about a potential worldwide deficit as the El Niño weather pattern looms over cane production in several key Asian producers including India and Thailand. That fear has seen prices surge in recent weeks. On Friday, white sugar futures in London touched the highest level in a year in intraday trade. Raw sugar in New York is on track to gain more than 7 percent this week.
‘The lower crop will contribute to deficits in the first and second quarter of next year and that’s already being priced in the market,’ said Claudiu Covrig, lead analyst at Covrig Analytics. With exports from Europe missing or at least reduced to a minimum, ‘prices will go further north.’
The European Commission’s MARS crop-monitoring unit last week cut its forecast for EU beet yield to 76 tons per hectare, down 7 percent from a year earlier, citing unfavorable weather.
While that’s near the five-year average, the prolonged heat has eroded any cushion for the crop, potentially pushing the EU to turn into a net importer of the sweetener, StoneX analyst Pedro Antiquera said in a note.
The outlook could deteriorate even more as weather forecasts continue to point to above-normal temperatures and limited rainfall, worsening already depleted soil moisture levels, according to Marina Malzoni, principal analyst for soft commodities at SandP Global Energy.
Covrig Analytics has cut its output forecast for the EU and UK to 14.7 million tons, the lowest since 2022 when high temperatures hurt output and sent prices soaring. The European Commission expects output in the EU alone to slip to 14.1 million tons.
‘With acreage continuing to contract, the sugar beet crop has become increasingly vulnerable to yield shocks,’ said Malzoni. ‘Prices are expected to increase in the near term as the supply-demand balance tightens.’
That could be a silver lining for European processors after two consecutive bumper harvests when the region was awash with sugar and a price slump squeezed their margins.
Sugar prices in the region have risen as much as 9 percent since June, lifting the premium that white sugar futures command over raw sugar, according to Arnaud Lorioz, chief executive officer of Paris-based brokerage Deepcore.
Still, a sustained recovery for processors will require a further reduction in supplies because Europe could still produce a small surplus, Stephan Bttner, chief executive at Austrian sugar producer Agrana, said in an earnings call last month.
Impact on the region’s top producers:
Output in France, Europe’s biggest producer, is set to drop by about 13 percent to the lowest in four years, European Commission data showed. The dry weather has caused ‘significant damage’ to sugar beets and accelerated attacks by weevils, according to the farmers’ group, CGB.
Second-largest beet grower Germany faces an additional threat from the rapid spread of the reed glass-winged leafhopper, a pest linked to a disease that cuts sugar content in beets, according to the local industry association WVZ.
Poland, the European Union’s third-largest sugar producer, is headed for an 18-percent drop in output this year after a smaller planted area and a cold, dry spring curbed beet yields, according to the sugar beet growers’ association KZPBC.