The weakening sterling recently has supported sugar prices in sterling terms.
Oct-25 raw sugar futures, traded in US$, have dropped over the past few months, but this has been partly offset by sterling also weakening against the US dollar.
In £ per beet tonne terms, sugar futures prices have fallen by c.£3.70/t, whereas had the sterling/US dollar exchange rate remained at the same level since 1 October, prices would be a further £4.20/t lower in beet terms now (see figure 1).
However, relative to the European sugar market which is denominated in euros, UK sugar prices will have received less support from currency movements.
Sterling has weakened relative to both currencies in the immediate past few days, but over a four-month horizon, the trend is driven by a strong US dollar specifically rather than weakness of sterling (see the contrast in figure 2).
As noted by Timothé in the section from WABCG below, the strength of the US dollar has had various impacts on sugar markets around the world.
EU white sugar prices fall
EU average white sugar prices suffered their largest month-on-month change in October 2024 since the managed market ended, and price reporting for November shows values continued to slide.
EU price reporting is based on all sugar shipped in that month, so includes a very high proportion (c.97%) of sugar already sold and priced on contracts by the time it is shipped.
Only a small fraction of European sugar is sold at on the spot market. As sugar sales contracts commonly begin from either the start of the campaign year (October) or calendar year (January), the very large price drop in October is likely to be followed by a further drop in January once new calendar year contracts also feed into price reporting.
As shown in figure 3, the price direction in January almost always follows the price direction in October, and together these two months are often among the largest moves in EU reported average prices during a year.
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.
After a brief rally around the end of 2024, a lack of demand, low white premiums and a return to a major short position by the speculative element has seen the futures market return to the lower levels seen last year.
Weather continues to remain stable in major cane growing areas while the European crop appears to be continuing unhindered.
The recent catastrophic fires in Los Angeles are a reminder of how quickly weather can change but without any major issues being seen in major sugar producing areas. It would appear that the expected surplus for the second half of 2025 is likely to be confirmed and the market may well have to settle into a more bearish stance until something changes.
The lack of demand has curbed the enthusiasm to take delivery of sugar on the March contract which has lost a lot of its premium over the contracts further forward.
While still the highest value contract the next six weeks or so will determine if anyone is prepared to receive sugars against the delivery.
Crops in India and Thailand currently look to be progressing well and the strength of the US dollar, particularly against the Brazilian Real, is encouraging more sugar production at the expense of ethanol where possible in Brazil.
At the time of writing, prices have bounced from the lows but it would seem that something will need to change in the supply/demand balance for a more sustained rally to be seen.
The WABCG view: a new drop in sugar value
Taken from the World Association of Beet and Cane Growers’ Flashmarket newsletter on 6 December, by Timothé Masson, Executive Secretary of WABCG and economist for the French beet growers association, CGB.
World prices fell sharply in December, with raw sugar futures down more than 7% and refined sugar futures down more than 5%. As a result, raw sugar has fallen below 20c/lb, a level not seen since last September.
However, there has been little fundamental news in recent weeks.
The reason for this price fall is more to be found in currency parities: the strength of the dollar since Trump's election in the US is historic and all currencies are suffering.
This is particularly true of the Brazilian currency, the real, which has lost more than 2% over the month. It now costs almost 6.2 BRL to buy one dollar, an unprecedented fall of more than 20% in a year.
As a result, many are expecting another historically high allocation of sugarcane to the export sugar market for the next Brazilian campaign, which starts next April – sugar will be sold in dollars and will therefore bring more reals than before for Brazilian processors. Whereas domestic ethanol, which is gaining in value in BRL (+3% in one month), is actually stable when denominated in US dollars.
This must be what the speculators are thinking, as they were net sellers of more than 3.3Mt at the end of the month, compared with less than 0.9Mt at the beginning of the month – they are anticipating future availabilities and thus amplifying the fall in prices.
But isn't this a bit exaggerated? S&P, for example, revised its global balance sheet on 7 January and still expects a global deficit – limited for the current season (-0.7 Mt between October 2024 and September 2025), but more pronounced between October 2025 and September 2026 (-2.7 Mt)...
Grains are much better, oil is holding up remarkably well given the tensions in the Middle East, and freight is very quiet.