EU sugar prices have turned a corner with plantings expected to fall sharply in the coming campaign.
World prices have also rallied; while most still expect a return to surplus in 2025/26 (Oct/Sep), confidence in this idea has been hit by disappointing harvests in Asia this year and drier than normal weather in Brazil.
The EU and UK market situation
EU sugar prices reported by the European Commission continued to fall in January, reaching €557/tonne, ex-works (£436/tonne).
This reflects the low prices that were contracted for 2024/25 sugar last summer.
However, spot sugar prices have shown signs of recovering recently and are now thought to be above this level.
The low level of sugar prices for 2024/25 has put a strain on EU beet processing companies, with both Sudzucker and Agrana reporting losses for Q4 2024.
In this context, Agrana has recently announced the closure of two of its factories in Austria and Czechia.
These financial pressures are resulting in lower beet prices across Europe for 2025/26 and are expected to result in a fall in beet area.
GlobalData forecast beet area to fall by around 7-8%; others think the result will be closer to 5%. Either way, this should push the EU-UK market balance back into clear deficit, thereby supporting sugar prices relative to 2024/25.
Good weather conditions mean that, unlike the past year, farmers should be able to plant their beet on time.
Looking ahead to 2025/26, there have been some early sales completed in the region of €550-580/tonne (£460-480/tonne), ex-works Northwest EU, which is the equivalent to £520-540, ex-works UK.
This price is also close to the cost of importing and refining sugar at a world No.11 sugar price of 19 cents/lb.
If this price level is achieved for the 2025/26 crop year as a whole, it might translate approximately into a beet price under the market-linked bonus scheme for 2025/26 of around £32-33/tonne.
The big question is – what sugar price will be established when negotiations between processors and ends users start in earnest in April/May?
The scale of the area reduction will be an important driver; a larger-than-expected drop will favour processors and vice versa.
The EU market started 2024/25 with high opening stocks. The extent to which these stocks will be drawn down, thereby tightening the outlook for 2025/26, will also be important.
Exports in December remained firm (albeit slightly lower than January and February) while imports have continued to be weak due to the low level of prices.
Anecdotally, demand is also reported to be better than last year, although there is no official data on this. These trends will need to continue if processors are to be in a better negotiating position than they were last year.
World market situation
The past month has seen considerable volatility in world raw sugar prices in the run up to the expiry of the March contract, with nearby futures rallying above 21 cent/lb before settling at 19.5 cents/lb on expiry.
In the end, a record amount of sugar was delivered against the contract.
Looking ahead, the consensus remains that the market looks better supplied in the second half of 2025 than in the first.
However, prices are being supported by a number of factors:
- The 2024/25 harvests in India, Pakistan and Thailand which are currently ongoing look set to be smaller than expected. In India, this will leave the country with low ending stocks and could mean it does not export the full one million tonnes that has been permitted. Meanwhile, Pakistan will need to turn to imports later in the year, having been an exporter in recent months.
- Rainfall in Centre/South Brazil, the world’s biggest sugar producer, was below average in January, February and early March. This puts a question mark over its 2025 harvest, which will begin in April.
- Forecasts of large surpluses in 2025/26 (Oct/Sep) are coming down, with some analysts now forecasting a deficit.
The result is that futures prices are more than two cents/lb higher than two months ago and the structure out to March 2026 is broadly flat (Diagram 2).
In other words, the market is not yet confident that a surplus will materialise in the second half of the year. Part of the reason for this is that stocks are low in many importing countries, which is creating demand below 18 cents/lb.
These factors point to prices trading in 17-20 cents/lb range most of the time this year, with prospects for Brazil’s 2025 harvest set to be the key driver.
While market tightness should ease when Brazil’s 2025 harvest starts, pushing prices lower from this point, weather volatility has meant the world has struggled to produce surpluses in recent years with production prosects in Brazil remaining in doubt.
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.
Following a record delivery of around 1.74 million tonnes against the March No.11 contract, to two receivers, and the apparent ‘risk off’ policy taken by many following President Trump’s tariffs, the market declined sharply to just below 18 cents/lb in the May 25 No.11 contract.
The speculative element in the market began to re-establish their short position despite there being concerns over the availability of South Brazil sugar before the new crop begins and revised estimates, downwards, to both the Thailand and Indian crops.
Since then, the market has rebounded and at the time of writing, sits just above 19 cents/lb in the May contract.
The global uncertainty of tariff plans and solutions to the Ukraine/Russian war are likely to create considerable volatility in all markets.
Although sugar is not particularly bearish in the short-term, outside factors could affect prices, ignoring the base fundamentals that appear to be keeping sugar relatively steady at the moment.
As we have mentioned before, the importance of how the new Brazilian crop develops will influence sugar prices over the next few months. It is clear that demand picks up when the market falls below 18 cents/lb and, assuming this continues to be the case, it is likely that we will see prices confined to a 2-3 cent/lb trading range in the medium-term.
The beet price which traded down to the mid £20s currently sits at £29.24.
The WABCG view: February – a crazy month
Taken from the World Association of Beet and Cane Growers’ Flashmarket newsletter on 6 March 2025, by Timothé Masson, Executive Secretary of WABCG and economist for the French beet growers association, CGB.
The nearby futures position changed this month: the first quoted delivery month moved from March to May 2025 on 15 February for the white sugar and on 28 February for the raw sugar.
And this had an impact on the market this month.
During the first two weeks of the month, raw sugar rose. Indeed, the market needed sugar before the start of the Brazilian campaign.
So, slowly and gradually, speculators were less and less net sellers to end the month at a level of 3.6 million tonnes, a less dramatic volume than before. And so, before these dates, prices had risen very sharply, with the raw sugar moving above 20 cents/lb...
But then, as the nearby futures position moved from March to May, the market fell sharply. First, analysts are now expecting new sugar from Brazil to be available for delivery in May. Then analysts learned that only two buyers split 1.7 million tonnes of sugar when the March delivery contract expired – does this mean that buyers are not as present as expected?
But uncertainty is everywhere and it is affecting the sugar market. Where are we going, what can we predict? Where are currencies going?
But let's not forget that the global balance hasn't changed that much so far. On 4 March, S&P updated its global deficit to -2.4 million tonnes for 2024/2025 (Oct/Sep) and forecasts a new deficit of -1 million tonnes for 2025/2026.
Furthermore, demand is still there; look at the white premium, which is back above $120/tonne, a level not seen since last August.
Last but not least, ethanol in Brazil is still high.
In conclusion, there is no doubt that the market is overreacting – and it is certainly not over yet.