Sector developments

World market prices for sugar, 2004–2014
World market prices for sugar, 2004–2014 (line chart)

World sugar market

Rising global stocks for the third year in a row caused further sharp falls in world market prices for sugar in the financial year 2013/2014. As in recent years, prices were subject to great volatility. At the beginning of the financial year in March 2013, the average sugar price on the London Futures Exchange (White sugar No. 5, free-on-board, earliest delivery) was USD 527 per tonne. It fell successively in subsequent months to reach a new low of USD 427 per tonne in January 2014.

The sugar market in the EU

In the past, the EU sugar market was largely decoupled from the global market by the European sugar market regime. As a result, it was characterised by very stable volumes and prices, with its surpluses being exported to the world market.

All this changed with the reform of the sugar market regime in 2006. The quotas for producing sugar for human consumption in the EU were reduced to around 80 to 85 per cent of market demand. Since then, it has been necessary to import sugar from ACP and LDC countries. The non-quota sugar produced in the EU in excess of the quotas is sold to customers outside the food industry in the EU or can be exported to non-EU markets up to a total volume of 1.37 million tonnes.

If the import volumes provided for by preferential agreements are not sufficient, the European Commission can respond to these market developments within the framework of the sugar market regime to guarantee a stable supply of sugar. To cover demand for sugar from the food industry, it can both approve non-quota sugar for human consumption and enable additional imports at reduced import duties. The European Commission takes these decisions on the basis of supply balances for each sugar marketing year, which in the EU runs from 1 October to 30 September of the following year. This means the financial year for Nordzucker AG straddles two sugar marketing years.

In the sugar marketing year 2012/2013, a good 3.5 million tonnes of sugar came into the EU under preferential agreements. The European Commission also allowed 1.2 million tonnes of sugar to be brought to the EU market from additional imports and allowances of non-quota sugar. Corresponding steps have been announced for the current marketing year 2013/2014, but not yet adopted. In the financial year to date (until 28 February 2014), a total of nearly 1.6 million tonnes of sugar has been imported under preferential agreements.

Market for animal feed and molasses

Supplies of animal feed were low in the past financial year. Although the two previous years’ harvests had been good, there were hardly any stocks and the 2013/2014 harvest could not repeat the particularly strong performance of the last two years. Prices for pellets and pressed pulp went up as a result, although prices for grain were down.

Supplies of molasses were also limited in the reporting year. As in the previous year, the beet quality was good and so a lower quantity of molasses was produced. Nordzucker increasingly sells molasses to the fermentation industry instead of as animal feed. Here, too, prices trended upwards.

Market for sweeteners

The market for stevia and products sweetened with stevia has grown steadily since stevia (steviol glycosides) was approved by the EU for food and beverages in 2011. Numerous products are now on the market and many others are still in the development phase. These activities will successively boost market volumes, which are still low.

Market for bioethanol

The political circumstances for the future use of biofuels in Europe are still unclear and consumer demand remains subdued. E10 has a market share of 15 per cent in Germany and has remained flat at this low level.

At the same time, the good harvests mean that bioethanol can currently be produced cheaply from grain or maize. Imports from the USA, some of which have circumvented the anti-dumping duties, have expanded supplies. In the reporting year, the price of ethanol in Rotterdam fell as a result by 24 per cent to EUR 478 per tonne most recently.