Rapidly rising world sugar prices and bad weather, speculative hedging on supplies and stockpiling across the world have combined to leave end user manufacturers in bakery, confectionery and the wider food industry worrying about sugar supply problems.
In Europe, sugar shortages in recent months have been enhanced by the movement of world prices, which have risen above the bloc's set prices of €404.00 a tonne for white sugar and €335.20 a tonne for raw sugar.
Earlier this month, the EU sugar management committee, in a bid to remedy the deficit, suggested releasing out-of-quota sugar onto the internal market and opening the import quota.
Intervention strategies
But Ben Eastick, director of UK based Ragus, which produces specialist syrups, treacle and unrefined sugars, predicts "further price increases," and he stressed to this publication that: “if the Commission allowed imports from the world market duty free then this would probably have the effect of increasing the world market values, thus making it more difficult to attract imports [to the EU].”
Sugar traders would continue to look beyond the EU and to sell to those markets where they can get a better price for their ingredient, he argues.
November last year saw the Commission suspend its E98/ton import duty to make imports cheaper. But Eastick, citing the fact that more than 20 per cent of EU supplies come from imports now, claims:
“The EU pre-reform reference price was €632 per tonne and in today’s market to attract CXL supplies the price needs to be around €750 per tonne. The current reference value of €404m/t will not attract CXL supplies even with suspending the €98m/t duty.”
The Commission’s other proposal to re-classify 500,000 tonnes of out-of-quota sugar will only really benefit sugar producers in France and Germany, argues Eastick, as they are the “largest producers with available excess stock potential.”
Crop forecasts
The reform of the EU sugar regime has exposed consumers to supply volatility, claims Eastick, who told sister site FoodNavigator.com recently that recent price fluctuations had unsettled everyone from traders to producers, “who have been used to ‘just-in-time’ supply over the past 15 years”.
The northern hemisphere cane crops will now determine supply availability for 2011/12, he predicts. “Southern hemisphere cane crops and northern hemisphere beet crops are showing disappointing results,” said the director.
Eastick revealed that Ragus, which has 75 per cent of its turnover coming from baking, and the remainder from sectors such as brewing and confectionery, has “honoured to date” existing sugar supply contracts, adding that taking on new clients is measured on a case by case basis, but “is limited”.