As I browse the web researching various topics concerning the EU and UK sugar markets, I've been bookmarking interesting weblinks. Some of these are news clippings, some are links to official documents, and some are interesting data sources.
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Dr. Mark Carr, Group Chief Executive of AB Sugar, has taken the decision to retire from the company. He will be succeeded by Paul Kenward, who is currently Managing Director of British Sugar and a member of the AB Sugar senior leadership team.
Between the beet in the field and your sugar, semolina in yogurt, there are an enormous amount of processing processes that require energy and water. We have fought for agriculture to be one of the "critical and strategic" sectors at EU level. In July last year, the Commission recognised that agricultural sectors are critical and strategic and that they must not suffer from cuts. Now we must do the same at national level. Production costs are reaching record highs for farmers, while prices in French supermarkets have not yet gone up. How can this be explained? We have very powerful, organised and united retailers in France who put enormous pressure on prices. This leads to the fact that we have cheap food. We have an inflation rate of just under six percent in France, while it is 18 percent in England, 17 percent in the Netherlands and 28 percent in Estonia. The difficulty for us producers is to pass on our production costs to the end of the food chain.
We have always been clear that we do not intend to go back on our commitment to the environment. There has also been speculation that Defra may change or delay proposed Environmental Land Management schemes with coverage in the Observer and BBC Online. A Government spokesperson said: Claims we intend to go back on our commitment to the environment are simply not right. A strong environment and a strong economy go hand-in-hand. We have legislated through the Environment Act and will continue to improve our regulations and wildlife laws in line with our ambitious vision.
Tereos Brasil intends to send 25% of its biofuel production to Europe in the 2022/23 crop (estimated at 520 million liters). This is the largest volume shipped abroad in the company's history and is expected to represent a turnover of US$ 100 million. To Broadcast Agro, Tereos' commercial director, Gustavo Segantini, said the continent had become "a good outlet" for Brazilian plants after biofuel lost its advantage in the domestic market, with the reduction in the rates that fell on fossil fuels. According to data from the Datagro Price-Reporting Agency (PRA) passed on to Broadcast Agro, the price of anhydrous ethanol from São Paulo in the port is around R$ 3,102.61 per cubic meter. The price of biofuel destined for the European Union reached R$ 4,162.62 per cubic meter in August, according to comex stat information compiled by Datagro.
Quite bullish EU sugar market news today: The CXL “Erga Omnes” import quota was oversubscribed by about four times – the allocation coefficient was 28.570644 per cent. There were applications for 911,390 tonnes, but only 260,390 tonnes could be allocated. Bearing in mind that the bank guarantee required to apply for CXL import licenses is 20 €/t, applicants would have had to put in place a total bank guarantee of 18 million euros. However, since customs officials require the full import duty of 339 €/t to guarantee “end use”, i.e. to guarantee that the sugar will actually be refined, the total amount of money that applicants will have had to put at risk to make these applications is about 330 million euros! Of course, the bank guarantees for quantities applied for but scaled back by the allocation coefficient, will be returned in respect of the unsuccessful applications. These applications would only really make sense if refined sugar prices were at least 800 €/t in the refining Member States, excluding finance costs and any margins, and assuming costs from CIF raw to DDP refined is about 150 €/t.
This year’s French sugar beet harvest is forecast by Agreste, the government statistical service, to decline to 33.3 million tonnes, a reduction of 3.0% compared with 2021 and down 9.8% compared with the 2017-2021 average. The average yield is estimated at 832.3 q/ha in 2022, compared to 855.1 q/ha in 2021 and 824.4 q/ha over five years. Compared with other autumn crops, sugar beets are more resistant to drought, Agreste added.
Organic production has been placed front and centre of France’s Common Agricultural Policy (CAP) strategic plan – but despite some environmental progress, critics have raised concerns about the plan’s ability to meet the objectives of the European Green Deal. France is the biggest European beneficiary of the CAP, slated to receive €45.2 billion over five years, over a tenth of the entire €400 billion CAP budget. On August 31, the European Commission officially approved France’s nearly 1000-page National Strategic Plan (NSP). Through these plans, member states set out an individualised action plan of how they intend to meet the nine objectives of the CAP reform, which will enter into force on 1 January 2023. The agricultural element of the EU’s Green Deal, the Farm to Fork strategy, aims to reduce the use of pesticides by half, the use of antibiotics in livestock farming by 20% and devote 25% of cultivated land to organic farming. The National Low-Carbon Strategy, like the Green Deal, aims to achieve carbon neutrality by 2050.
Today marks the start of the beet campaign at the Cosun Beet Company factories. The campaign in the Netherlands is expected to last 19 weeks this year, which means that the factories in Dinteloord and Vierverlaten will be in operation until 24 January. This year’s beet yield is expected to be around 88 tonnes of beets per hectare, which should result in a sugar yield of 14.8 tonnes per hectare. This is around 6% more than the average of the past five years. It was a good growing season – until the drought hit at the end of July. This has chipped away somewhat at the yield potential. Depending on the circumstances in the next few months, the expected yield may be adjusted.
Taking place in person in London on 22 and 23 November 2022, registration is open for the 31st ISO International Seminar. The seminar will be co-chaired by Patricia Luis-Manso and Maria Nuñez of S&P Global Commodity Insights, and will feature a wide range of speakers including Niels Pörksen (CEO, Südzucker), Michael Schaupp (CEO, Pfeifer & Langen), Aditya Jhunjhunwala (President, Indian Sugar Mills Association), Sergio Zandamela (Chairman, APAMO Mozambique), Nick Jackson (Vice President, Eswatini Sugar Association), Sifiso Mhlaba (SASA, South Africa), Tracey Mutaviri (Zimbabwe Sugar), Corinna Olearo (Nestlé), Jamal Al Ghurair (Al Khaleej/Canal Sugar), Hassan Erwa (Kenana Sugar), Alfredo Vila (Union de Azucareros de Latinoamérica), Plinio Nastari (Datagro, Brazil), Luis Miguel Paiz (CEO, Guatemalan Sugar Association), Rob Johansson (American Sugar Alliance), Filippo Guerrini (Control Union), and many others.
EU agri-food companies are struggling to maintain operations amid mounting energy prices, with some faced with pausing production, laying off staff or going out of business altogether, according to a joint statement issued by the EU’s major food sector associations. Squeezed between mounting prices for natural gas, fertilisers, electricity and packaging while facing one of the worst droughts in recent times, the EU agrifood sector’s production costs have soared over the past year.
AB Sugar revenue is expected to be substantially ahead of last year driven by higher sugar and co-product prices. The contribution from higher market prices and the continued focus on cost savings broadly offset the effects of significant input cost inflation, particularly energy, and some operational difficulties in Southern Africa. Recommissioning costs and start-up losses at our Vivergo bioethanol plant were some £30m. We are expecting operating profit to be ahead of last year. European sugar prices moved much higher this year. Looking ahead we expect European sugar demand to remain in excess of production in our next financial year. These stronger prices have been supported by higher world market sugar prices. UK sugar production was 1.03 million tonnes, compared to 0.9 million tonnes in the last campaign, with much improved sugar yields as a result of good growing conditions. The factories performed well. Forward cover of gas costs mitigated much of the impact of very high energy prices in the year. We have benefitted from improved margins for electricity produced for export to the grid and from bioethanol derived from sugar beet. Recommissioning at Vivergo has progressed well. The performance in Spain improved with higher prices, production and sales volumes. Very high temperatures in the south of Spain have reduced beet crop yields and increased imports of cane raws for refining have mitigated the shortfall. Illovo continued to deliver strong domestic and regional sales volumes and benefited from higher market prices. The season saw disruption to production in Malawi, Eswatini and Mozambique following cyclones Ana and Eloise and high rainfall in South Africa. As a consequence Illovo's sugar production for the full year is expected to be 1.45 million tonnes compared to 1.58 million tonnes last year. We expect adjusted operating profit to be in line with the much improved result last year.
In 2007, the U.S. Congress mandated the blending of biofuels such as corn-based ethanol into gasoline. One of the top goals: reducing greenhouse gas emissions. But today, the nation’s ethanol plants produce more than double the climate-damaging pollution, per gallon of fuel production capacity, than the nation’s oil refineries, according to a Reuters analysis of federal data. The average ethanol plant chuffed out 1,187 metric tons of carbon emissions per million gallons of fuel capacity in 2020, the latest year data is available. The average oil refinery, by contrast, produced 533 metric tons of carbon.
Vesper announced today to have added sugar to its portfolio of commodities, making it the first user-friendly and independent sugar intelligence platform in the market. Vesper's intuitive platform allows businesses to buy, sell and trade against the best possible price, whilst giving back time through easy-to-understand dashboards providing data and in-depth market analysis for the sugar market across the EU, Brazil, Thailand and India. The platform includes forecasts, an import parity widget and the proprietary Vesper Price Index (VPI). The VPI is a new sugar price benchmark created by buyers, sellers and traders, helping them trade at a fair price. Richard Polánek, Global Procurement Director at PepsiCo, is excited Vesper will bring more transparency to the sugar market. “Vesper’s real-time data will further democratise the sugar industry, help buyers better understand the market and mitigate risks.”
The high dynamics in the agricultural and sugar markets as well as the growing costs of sugar beet production have forced sugar companies - to the satisfaction of growers - to raise prices in contracts concluded for the 2022/2023 campaign. After Südzucker Polska SA and Krajowa Spółka Cukrowa, Nordzucker Polska SA has also informed growers about an increase in beet prices.
Germany’s competition regulator has given the green-light for the country’s major sugar manufacturers to cooperate in the event of gas supply shortages worsening. But the Bundeskartellamt has stressed the deal – proposed by the sugar firms – is a “one-time temporary cooperation project”. Four companies – Nordzucker, Südzucker, Pfeifer & Langen and Cosun Beet – are planning to work together in order to ensure the continued processing of sugar beets if a shortage occurs. The German sugar industry association, Verein der Zuckerindustrie (VdZ), is also included in the cooperation agreement. The 18 sugar factories run by the four companies are for the most part powered by natural gas.
The Board of Directors has just announced in a press release its decision to adjust upwards the price of beet delivered by its cooperators during the 2021/22 marketing year. The cooperative also shares the start-up schedule of its French factories for the new beet campaign. In order to limit the cooperative's exposure to gas supply risks over the next winter, the cooperative is also anticipating the start of its new beet campaign. "After consultation with the cooperators, the 9 French sugar factories will start between 8 and 21 September 2022, i.e. up to 8 days earlier. This schedule also takes into account the update of the yield forecast, below the 5-year average, and the persistence of drought".
This week's test clearing results show a strong variation in yield expectations in the fields and in our factory areas. Therefore, despite expected guest restrictions and the goal of ending the campaign in December, we are postponing the campaign launch dates for a few more reasonable days. Pfeifer & Langen and the Rhenish Beet Growers Association have agreed on the following campaign launch in 2022. Beet delivery to sugar factories begins: Appeldorn: Monday, September 26 Euskirchen: Tuesday, 04 October Jülich: Monday, September 19 The top priority remains: Process all sugar beets!
Over the years the sugar sector has been increasingly constrained by a regulatory straitjacket covering all stages of production. More recently, the Green Deal and its two components “Farm to Fork” and “Fit for 55” threaten to add multiple constraints that risk clashing with the formidable consequences of the Covid crisis and the Ukrainian war. In this context, should the sugar sector be subjected to regulations that are not adapted to its needs? Or should it be fully recognised for its contribution to food security and energy independence?
The National Confectioners Association (NCA) and the Association of Chocolate, Biscuit and Confectionery Industries of Europe (CAOBISCO) are deeply concerned with the current state of sugar markets in North America and Europe. In both geographic areas, tight supply and supply chain obstacles have pushed prices to historic and unsustainable levels: “We are urging the US and The EU Commission and Member States to relax tariff-rate quotas (TRQs) to allow for additional and faster importation of quality white sugar. Where possible, we encourage collaboration and cooperation to facilitate access to additional imported sugar supplies. There are several tools available to both the American and European authorities. “Inaction could result in factory slowdowns and stoppages in a time of global economic uncertainty. This uncertainty places a burden on the market and the consumer, especially when we look to deliver products in a timely manner. Currently, demand far exceeds supply, and this has a ripple effect throughout the whole supply chain.”
In the next few weeks, the harvest and processing of the sugar beet will begin. The lack of precipitation is also putting a significant pressure on earnings expectations in the sugar industry. The cultivation area is slightly larger than before. Nevertheless, both the volume of beet and sugar production will be significantly lower than last year and even below the three-year average. "We expect disappointing harvest results. In addition, the industry is driven by the gas shortage situation. Without a reliable energy supply, it is difficult for customers to be supplied with regional and sustainable beet sugar," says Günter Tissen, Managing Director of the German Sugar Economic Association, summing up the situation. Sugar beet is not storable for long. Therefore, in the short energy-intensive campaign, sufficient energy must be reliably available for harvesting, transport and processing. "The sugar industry is working feverishly on location-adapted solutions for this purpose. These mean considerable additional costs for companies. In addition, the prices for energy and other equipment have risen significantly." A secure energy supply will continue to be important in the future. By 2045, the energy for the operation of the factories is to be obtained from biogenic residues – beet pulp from our own production. "This would allow us to produce sugar almost independently of external energy sources and in a climate-neutral manner. However, the regulations on the Renewable Energy Directive must not put a spanner in the works here. MEPs and the member states can still set the right course," Tissen appeals to politicians.
The expected sugar yield of beet in the Netherlands is 14.8 tonnes per hectare. That is slightly above the five-year average of 13.9 tonnes, reports Cosun Beet Company. However, the persistent drought inhibits crop growth.
France's two largest sugar makers Tereos and Cristal Union will bring forward the start of their 2022 production ahead of possible energy restrictions by the government this winter if Russia cuts off gas supplies, they said on Wednesday. Sugar production is among the most energy-intensive industries. French factories, which usually run between mid-September to early February, are highly reliant on gas to transform their sugar beets into the sweetener.
The sugar beet is struggling, but it resists. The very good potential of the end of June allowed the plants to spend the month of July without too much trouble and to enjoy the sun to make sugar. But this potential has gradually deteriorated since the beginning of August. The result: high sugar richness, low root weights, few leaves... and weather that stays hot and dry. There is now a strong uncertainty about the ability of beets to continue to develop.
The ongoing drought has delayed the harvest of East Anglia's sugar beet crop - prompting British Sugar to push back the opening dates for its factories. The firm announced that its factories at Bury St Edmunds in Suffolk and Cantley in Norfolk will open later than usual this year, on October 5 and 20 respectively. It said this was due to "exceptional climatic conditions over the summer", with these factory areas receiving less rainfall than Wissington in west Norfolk and Newark in Nottinghamshire, which will open on September 26 and 19 respectively. While he is more optimistic after last week's rain, Mr Blenkiron still estimates his overall sugar beet yields will be about 30pc down on average - costing a potential £100,000 in lost revenue for a business already grappling with huge rises in energy fuel and fertiliser costs.
With slightly higher sugar contents than in previous years, Nordzucker expects the overall harvest to be slightly below the average of previous years. The partly extreme dryness leads to significant regional differences in beet yields. Current planning assumes that beet processing will be completed by the end of January 2023. The current uncertainty in the gas supply has led to particular challenges. “Where possible and necessary, our colleagues have switched the factories from gas as an energy source to oil since the end of February in order to secure the processing of the sugar beet. In this short period of time, this is a tremendous achievement,” Alexander Godow, COO, elaborates. “In this way, we are securing the supply of sugar from regionally grown sugar beet for our customers. In addition, Nordzucker is helping to relieve the tight gas market for the benefit of all consumers.” Nordzucker expects to have sufficient gas available during the campaign even at those locations where conversion was not possible.
Nestlé has shrunk the size of its Quality Street tubs for the first time in three years in a bid to mitigate soaring costs, The Grocer can reveal. The 650g tubs that were on sale last Christmas have been replaced by 600g ones. At the time of writing, they were listed in Tesco for £4 – the same price carried by its larger 650g tubs in the retailer last year [Assosia 52 w/e 23 August 2022]. The brand’s cartons have also been downsized, shrinking from 240g to 220g. At the time of writing, the new 220g packs were listed at £3 in Tesco, Sainsbury’s and Morrisons, and were priced at £2 in Asda – the price the old 240g packs were sold at in those retailers.
Germany's second largest sugar producer Nordzucker on Thursday said it will start this year’s sugar refining season on Sept. 3 and reported success in converting refinery plants to oil fuel because of uncertainty about gas supplies. Over 80% of its German sugar production capacity has been converted back to oil, a Nordzucker spokesman said. Nordzucker had in previous years been actively switching sugar factories to gas power as part of its programme to reduce carbon dioxide emissions.