Date: August 2015
This season’s beet molasses harvest is expected to be lower than the previous year’s, resulting in an upward movement of price. This is mainly a result of the low world sugar prices initiating a drop in planted sugar beet acreage, and hasn’t been helped by a lack of rain Germany and Holland providing poor growing conditions. It was hoped that the larger planted acreage in Russia would offset the issues encountered in Western Europe. However, similarly poor growing conditions and the knock on effect this will have on yield levels look to have taken away any gains in acreage.
After a long absence from exporting, Pakistan has been shipping numerous cargos into Europe and the rest of Asia throughout the summer months. This has however now come to an end, with the total export figure coming to 70,000 MT. With the current world sugar price as low as it is, it only makes sense for the sugar mills to sell the cane as an ethanol stock rather than to refine it into sugar. This, therefore has a negative impact on the exportable cane molasses figure if less is being produced, forcing an upward movement in price.
India’s sugar industry is in dire straits. The current system entails the government setting the price that the mills must pay the farmers for their sugar. Problems are arising from the fact that the price paid by the mills for the cane is higher than the sugar price the millers can receive on the world market. The milling industry are currently fighting their case, however with small hold sugar farmers making up a substantial part of the voting public it will be difficult to find progress.
Due to India being the best option for H2 exports to Europe and the growing Asian market, prices have moved upwards from this origin as shippers look to secure their supply for the winter amid a reduction in exportable quantities of molasses across the world.
Thailand had a considerably larger sugar cane crop and molasses yield than the previous year. This however has been offset by the rapidly growing ethanol market and a reluctance from producers to switch ethanol stock to the similarly subsidised Tapioca plant. This has led to a net export figure of 400k MT, similar to last year.
Due to the growing middle class, the increase in alcohol consumption and the high level of ethanol production due to gov subsidies throughout the South and South-East of Asia, the market dynamics have altered slightly. Whereas even 2/3 years ago, excess supply from Asia lead to large scale exporting into Europe; Asia is now consuming more molasses than it produces, resulting in cargos from Central America having to be imported to plug the deficit.
The Central American crush is now over, with a similar size molasses crop as last year. H1 exports were split almost 50/50 between USA and the EU with the occasional shipment landing in Asia. The remaining cargoes for H2 will now be shipped to the US.
The smaller European sugar beet acreage of 2015 looks set to tighten supplies moving into Q4. Low world sugar prices have led to a tightening of best molasses supply, pushing the price up as feed users of continental Europe switch back to cane molasses. This coupled with Central America (Europe’s most popular origin in recent year) shipping cargos to fill the gap left by the Asian deficit has caused a firming in the market.