COMMODITIES 2025: European producers set to cut sugar output

This is part of the COMMODITIES 2025 series where our reporters bring to you key themes that will drive commodities markets in 2025.

Future of sugar production

German and French producers have reported concerns over lower-than-expected sucrose content in sugar beets this season. Both countries are currently re-evaluating production strategies, a move that could have a ripple effect on future supply levels.

Additionally, EU producers are signaling they will reduce beet prices for 2025, down from an average of Eur50/mt ($52/mt) in 2023-24. This anticipated price drop may dissuade farmers from planting as much, potentially constraining supply in the coming years.

"Producers aren't offering, producers like Sudzucker are following the same strategy to avoid further price decreasing. They are announcing that for the next crop 2025-26 they will plant 12%-13% less, and maybe the sugar producers are thinking to bring forward the carryover volume from this crop to the next," said a market participant.

Fall in sugar consumption

Looking ahead to 2025, sugar consumption in Europe is expected to continue to decline. It has been falling due to changing consumer preferences, including a shift to healthier lifestyles and reduced sugar intake. This trend is leading to lower domestic demand across the region. Additionally, some European countries are experiencing increased sugar imports from Ukraine, adding downward pressure on prices.

The EU is expected to produce 15.4 million mt of sugar, a 4% rise from the previous year, thanks to a 6% increase in sugar beet planting as cited by the US Department of Agriculture (USDA). However, consumption is projected to remain stable at 16.5 million mt, leading to surplus pressure and contributing to falling prices. Additionally, EU sugar exports are expected to drop to 1.1 million mt, while imports rise to 2.4 million mt.

"Consumption is not the best in the EU as the economy is not in great shape compared to the US, Europe is really behind," a UK-based market participant commented.

The consumption rate for EU+UK is 16.7% for 2025-26 down from 17.1% in 2021-22. The production rate for EU+UK is 16.9% for 2025-26, down from 17.6% in 2021-22, according to S&P Global Commodity Insights estimates.

Rising logistics costs

Disruptions in the global shipping market are having a direct effect on sugar pricing. Rising fuel costs and supply chain congestion have introduced added costs, making European sugar exports less competitive on the world stage.

In 2024, container shortages have become a significant issue for European sugar exports and global trade overall.

Geopolitical tensions, such as the ongoing conflicts in Ukraine and the Middle East, have disrupted major shipping routes. These disruptions are forcing vessels to take longer routes, intensifying container shortages and increasing transit times.

Congestion at major European ports and a workforce shortage have further delayed the turnaround of containers. This issue is especially problematic in industries with time-sensitive supply chains, such as agri-food products like sugar.

This has caused freight rates to increase and delayed shipments, putting pressure on European sugar exporters. Importers and retailers also face rising costs and potential stock shortages as they struggle to secure adequate container space for their goods.

"Exports have not been easy to organize due to not having the capacity for bulk vessels and container shortages. The Red Sea is not allowing big flows, so ships are being forced into taking longer routes. The availability of containers is on the sea," a UK-based source said.

The latest forecast for 2024-25 EU+UK exports to the world market is unchanged at 1.8 million mt, while 2025-26 has been cut by 125,000 mt to 980,000 mt, according to Commodity Insights. Imports increased slightly in both seasons.

Ukrainian sugar set to return

Ukrainian sugar producers are gradually returning to foreign markets. Turkey and African countries remain the main destinations. Ukrainian sugar is beginning to conquer markets outside of Europe, and analysts note positive dynamics. However, due to complications with the war, it may be more difficult to export internationally.

"Ukrainians need to take sugar to their ports and their infrastructure isn't in good shape from the war. Finding clients from the international market will be hard for them," a market participant said.

Starting in 2025, the European market is planned to be partially opened for Ukrainian sugar, which can significantly affect price dynamics. Europe has set a 250,000 mt quota for Ukrainian imports for the year of 2025.

"Ukrainian sugar that is supposed to come [250,000 mt] is not good news for producers that still have volume bothering them," said a UK-based source.

Some sources reported expectations that Ukrainian sugar will be lower quality than other Europe-produced material, which means exports could have difficulty finding destinations in the EU if product fails to meet desired specifications.