Food and drink manufacturers should make savings on sugar this year, with prices for the white stuff set to stay low throughout 2018, thanks to booming European production.
EU sugar output will reach 19.5 million tonnes in the 2017/18 season, according to latest estimates from Informa Agribusiness Intelligence. That’s 3.5 million (21%) more than the 16.0 million produced during the previous year.
It follows the abolition of the EU’s quota system in 2017, which means all sugar produced in the EU previously classified as non-quota sugar can now be sold for food use.
This, combined with a strong rise in sugar beet production, in effect made the EU self-sufficient for sugar the year after quotas were abolished, says Stefan Uhlenbrock, senior commodity analyst at Informa Agribusiness Intelligence.
Abundant supplies have caused sugar prices to drop, but that won’t result in a significant drop in the area used for EU sugar beet production in 2019, according to Uhlenbrock.
“However, increased competition within the EU may lead to a structural reallocation of sugar production to more competitive regions in the ‘beet belt’ of central Europe which includes countries such as France, the UK, the Netherlands, Poland and Germany,” he adds.
It comes as Tate & Lyle this week announced net losses of €26m for the 52 weeks ending 25 September 2017, compared with a loss of €4.6m the previous year.
Tate & Lyle said it was paying inflated prices for imported raw cane sugar while having to sell refined cane sugar in the EU, in direct competition with subsidised beet sugar.
Associated British Foods, meanwhile, blamed low sugar prices for a 27% slump in operating profit at its sugar division - from £123m to £90m in the 24 weeks to 3 March 2018.