EU sugar production in the 2020-2021 season (October-September) is expected to drop for the third year in a row due to adverse weather conditions, high incidence of yellowing virus due to pesticide ban neonicotinoids and a smaller area.
Regarding trade flows, Brexit and the rollout of COVID-19 vaccinations will continue to be the focus of concern in 2021. Longer term, S&P Global Platts Analytics expects EU + Kingdom production to increase. United in 2021-22 over the year.
The EU is likely to remain a net importer in 2020-2021
The poor EU harvest prospects should lead the EU to remain a net importer in 2020-2021. One trader said there could be a 2 million tonne sugar deficit and “it will be hard to find [this volume] to make up for the deficit.
The trader also said that “although the EU cannot provide [regionally], it still has to export because of its long-term obligations. “
Platts Analytics estimates the 2020-2021 EU sugar deficit at 1.585 million tonnes, nearly five times the 343,000 tonnes in 2019-20.
Another market source said it expects the EU to “export almost nothing, or a minimum” outside of these long-term contracts in 2021.
The uncertainty surrounding India’s export subsidies has supported global prices in recent months.
EU market participants feared that if India ultimately decided not to reinstate the export subsidy, the resulting high world sugar prices would significantly reduce imports. However, imports to the EU would likely exceed exports.
The Indian cabinet approved the government’s sugar export subsidy in mid-December, which is expected to facilitate exports by up to 6 million tonnes in the 2020-2021 season. Sources said this could lead to lower prices in the world market, and in the EU market it could mean competitive imports weighing on domestic prices.
Brexit negotiations are still ongoing. In a so-called ‘no deal’ scenario, EU white sugar imported into the UK would be subject to a duty of GBP 350 / tonne ($ 464 / tonne), making EU white sugar uncompetitive. in the UK market.
The UK has a sugar deficit and meets its needs through imports from the EU, mainly France, and the world market. The UK is set to implement a new duty-free raw sugar import quota of 260,000 tonnes from all sources in 2021. This, combined with high import duties for white sugar from the UK. EU, and poor UK and French harvests in 2020-2021, could mean the UK increasing its raw sugar imports from the world market in the coming year at the expense of EU white sugar.
The import quota will likely encourage imports of raw sugar by the UK regardless of the outcome of a Brexit trade deal. Although a no-deal scenario would result in higher import duties for EU white sugar, market participants generally believe that Brexit would have a greater impact on internal restructuring of the UK market in the immediate future, rather than on the EU market. This is all the more true as the EU will be grappling with tight stocks ahead of the arrival of the new harvest towards the end of 2021.
However, Brexit could also have an impact on the EU-27 market. In the event that French sugar is no longer exported to the United Kingdom, this sugar could find its way to countries in southern Europe such as Italy and Spain.
Consumption will remain at the center of concerns until 2021
Consumption issues will continue until 2021. While lockdowns and travel restrictions are still in place across the continent, most EU countries and the UK are making plans to roll out coronavirus vaccines. The European Center for Disease Prevention and Control is expected to publish a new interim report in January.
A source said the widespread availability and effectiveness of vaccines could determine whether people “get back to normal” by the summer. Another source said “tourism would be an important factor” in determining whether consumption returned to pre-pandemic levels.
Assuming a return to pre-pandemic conditions, Platts Analytics expects consumption to rebound 1% year on year in 2021-2022 to 16.863 million tonnes.
EU + UK sugar production set to increase in 2021-2022
Platts Analytics expects sugar production between the EU and the UK to increase in 2021-2022 to 17.246 million tonnes from 16.312 million tonnes this season, based on a return to weather conditions norms and the decision of France to lift the ban on neonicotinoid pesticides to fight against virus jaundice. The decision to authorize the use of neonicotinoids for three years should stabilize the area of French beets, which has been declining in recent years.
Platts Analytics expects the EU and UK sugar beet area to decline 0.6% year-on-year to 1.601 million hectares in 2021-2022. Germany is set to see the biggest drop due to expectations of a continued neonicotinoid ban in many parts of the country and the fact that a lack of support from the European Commission could cause producers to look to others. cultures.