No.11 sugar prices have been stuck between 16 and 17 cents/lb for over a month now.
Prices did move up towards the higher end of this range at the beginning of last week, buoyed by the news that the short position held by the speculative funds was even bigger than the market had expected. This pushed the October 2025 index-linked contract to £21.70/tonne, its highest level for a month. But the end of the week brought negative news; production results in Brazil for the second half of July were better than expected, and prices fell back again.
At the lower end of their range, sugar prices have found support from rising ethanol prices in Brazil, which are now close to 16 cent/lb on a No.11 equivalent basis. This is providing a ‘floor’ for the market below which it is difficult for prices to be sustained without lowering sugar production.
Ethanol prices have risen for two reasons:
- At the beginning of August, the Brazilian government raised the ethanol blend in gasoline from 27% to 30%, thereby increasing demand.
- The poor cane quality and heavy focus on sugar so far during this campaign means that ethanol prices need to rise relative to gasoline to moderate the demand for unblended ethanol at fuel stations.
Supply and demand
Elsewhere, supply/demand developments have also been somewhat supportive.
- In Thailand, white leaf disease is affecting the crop in the Northeast of the country (the largest producing area).
- In India, monsoon progress has slowed somewhat and is now close to normal, having been above normal a few weeks ago.
- Demand has improved, with China ramping up its raw sugar purchases and Pakistan entering the market for white sugar.
However, while these factors have helped, the strong production results from Brazil mean they are not enough to change the market outlook. Below 16 cents/lb, sugar prices look low because Brazil will start to produce ethanol at the expense of sugar, reducing supply and tightening the market balance. But the upside for prices is being limited by India, which looks set to have more sugar to export when its 2025/26 harvest begins later in the year. If this sugar is exported, it could make the market look oversupplied at that point.
From the perspective of a UK grower looking to price their remaining beet on this year’s index-linked contract, the best hope of a recovery comes from the speculative funds and the potential for them to buy back some of their short positions. But this has been the case for some time now and time is running out for it to happen.
EU market developments
The second half of July brought much-needed rain to the major EU beet areas. While the UK also received some rain during this period, the dryness has been more severe than in the beet areas of France, Germany, Belgium and the Netherlands.
While virus yellows are an issue in parts of France, beet test results across the major producing countries indicate that an above-average result for the EU as a whole is still possible. As always, much will depend on the weather in the autumn; we must remember that wet conditions knocked around 0.5-1.0 million tonnes off EU production estimates last year.
We are now in the middle of the European holiday season and, consequently, the prices that are being agreed for 2025/26 sugar remain unchanged. Prices are still reported to be around €570/tonne ex-works, Northwest EU and around €600, ex-works in the UK. However, in mainland Europe, it remains the case that little sugar has actually been sold. Instead of locking in supply for the entire 2025/26 (Oct/Sep) crop year, many buyers purchased sugar for Q4 only, giving themselves more time to see how the crop develops.
At €600 in the UK, this would imply a small market-linked bonus would be payable in the 2025/26 crop year. However, some sugar will have been sold earlier, potentially at lower prices, leaving the market-linked bonus in the balance.
Finally, the 2026/27 UK beet price has been agreed. The lower price is expected to result in a smaller area planted to beet next year. There are also signs that this is happening elsewhere; Nordic Sugar (which has beet factories in Denmark and Sweden) has announced that area will fall by 10-16% in 2026/27. If this trend is repeated in other countries, it will tighten the EU balance further and help to support EU prices relative to the world market.
A trader’s view
NFU Sugar Board appointee and sugar trader Paul Harper shares his thoughts on the current market situation.
NFU Sugar Board appointee Paul Harper
Paul has spent his entire career in commodities and has been in sugar since 1976. He joined C Czarnikow in 1973 working in their London, New York and Singapore offices. Paul has a huge amount of consultancy experience, having consulted for a hedge fund, major bank and a large trade house in sugar during that time.
The October No.11 contract has been contained in a range between 16 and 17 cents/lb over the past month.
Statistics continue to tighten with Brazil still behind last years’ production and Thailand expecting lower yields. Weather in India still looks favourable, however low world prices and no sign of additional government movements on exports adds to the supply uncertainty.
Speculators still hold large short positions and this may prove to be an issue as we approach the October expiry particularly if the supply tightness continues.
The white premium has improved considerably from the lows seen a few months ago and this may well lead to additional refining thereby increasing raw sugar off take.
Weather will no doubt continue to play a large part as we move towards the end of the year and it remains to be seen if the market can break out of the recent trading range.
- NFU Sugar is working to influence UK-EU trade negotiations to protect the competitiveness of UK beet growers.
- NFU Sugar supports a transitional arrangement with a carveout to facilitate implementation of Precision Breeding.
