European sugar export premium hits record high on low supply, high demand

The Platts White Sugar Containers EU 45IC FAS Antwerp Premium for June shipment reached a record high of $155/mt to the underlying August London No. 5 futures contract on May 25 on high domestic demand and lower supply, according to data from S&P Global Commodity Insights.

"The main concern now is how to get sugar delivered at the right time and be exported, especially with freight rates being very high out of Europe," a source said.

There was no volume available for exports, with stock levels just enough to meet domestic needs, the source added.

"People [had been] looking more at India and Brazil for sourcing sugar with the new crop production in Brazil beginning in June, especially now that the EU is out of the picture," a second source said.

However, India, the world's biggest producer of sugar and the second largest exporter behind Brazil, earlier in the week said it will limit sugar exports to 10 million tons for the marketing season that runs till September. This will mostly affect white sugar exports.

The move had an effect on the underlying ICE Sugar London futures front-month contract that were trading 1.3% higher at $563.9/mt on May 25. The futures have gained 13.4% since January and were 3.3% less than a five-and-a-half year high, S&P Global data showed.

The White Sugar Containers EU 45IC outright price was also assessed at an record high of $717.7/mt on May 25, up 5.4% on the day, according to S&P Global data.

"Availability for export is very low, prices within Europe are [very] high, and there are no plans for producers to reduce prices in the coming months. So big exports coming out of Europe look unlikely," a third source said.

On May 20, Platts Western Europe White Sugar Delivered hit an all-time high of Eur920/mt, Platts Mediterranean Europe White Sugar Delivered hit 870/mt, 0.3% lower than the all-time high recorded the previous week, and Platts UK White Sugar Delivered hit an all-time high of Eur875/mt.

Corn, wheat, and barley prices have increased across the EU, resulting in sugar growers considering these crops as alternatives.

Meanwhile, the cost to produce sugar from beets has increased because of rising input costs, such as fertilizer prices, as well as oil and gas costs because of the Russia-Ukraine conflict.

Tight sugar availability and rising logistical costs have also contributed to rallying spot sugar prices across the Mediterranean and Western Europe regions.

However, if domestic prices continue to rise and become too high compared with the export premium, this gives no incentive for EU producers to export sugar.

A fourth source said: "Even at a premium of $200 to the August contract, spot prices are now hitting such high levels in the region of Eur900/mt so producers would not export at this discount."

The number of clients still under covered was unclear, with participants trying to avoid buying on relatively high levels, a fifth source said.

There was still demand for sugar in the traditional destinations covered by European exports, according to sources. On the other hand, supply had tightened from regions such as the EU, Ukraine, Algeria as well as India due to export bans, and Morocco was sold out.