Date: October 2016
Western Europe – Western Europe has had a very good harvest this year. With the 2017 relaxing of the sugar quotas; the sugar producers have put pressure on the farmers to increase planted acreage a year early in order to smooth the transition. This has led to a lot of upscaling already having taken place and more beet molasses available despite poor molasses yields.
Eastern Europe – Things are very similar in Eastern Europe where strong molasses yields have added to the supply.
Feed demand for beet & cane molasses is down on the continent due to the price vs other raw materials, resulting in a reduction of inclusion levels of molasses.
Fermentation demand has plateaued over recent months with the % of cane used by the industry replaced with beet where it’s been possible.
Almost the total harvest of Pakistan will most likely be sold into the ethanol industry. Despite the falling oil price, ethanol still maintains its price and required tonnage due to artificial demand in the form of a government initiative, requiring cars to run on fuel that has been blended with ethanol.
Another barrier for Pakistani molasses to reach the world market on a large scale is the 15% export tax that is applied to the commodity
Exports, however, are meant to be slightly higher than the previous crop at increasing from 50k to 75k.
India has achieved a good Sugar Cane harvest this year, however high yields have meant that they have done so even after a 25-30% reduction in planting areas in their molasses exporting regions. This will mean that exporting from India will be tough, especially as this has recently been a prevalent origin for cane molasses flowing into Europe.
Thailand’s crop looks set to be similar to last year, with the majority of molasses produced being taken up by the state funded ethanol programs.
For the first time, South-East Asia looks set to require as much molasses from the world market as it will export. Despite the increase in tapioca and corn starch as fermentation stock the region may even become a net importer in years ahead.
Due to the growing middle class, the increase in alcohol consumption and the high level of ethanol production due to government edicts 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; South-East Asia is now requiring cargoes from India and Central America to plug the supply gap.
With the low ethanol price in Central America, there will be a lot more molasses available for export. Usually this is good news for the European cane users, however Europe will now be competing with the whole of Asia for this cargo so it is difficult to know at this stage if a larger exportable quantity will translate into cheaper prices into Europe.
Historically a large beet molasses crop in Europe has resulted in a reduction in cane molasses demand from the Europe and a downward movement in price as the Asian origins found it difficult to shift fast enough. However, with Asia now in deficit and needing to import large quantities the reduction in cane demand from Europe merely results in the market staying flat.
With India having such a weak exportable molasses quantity, Asian demand will need to be satisfied with Central American cargoes which looks set to negate any downward price movements expected from a large CA harvest.
2017 EU Sugar Quota
An interesting development moving forward is the EU-wide removal of:
- sugar export limits
- guaranteed minimum sugar price
Removal of sugar export limit – this will mean in countries such as Germany and France, where sugar producers have the capacity to increase production, economies of scale will allow sugar to be sold competitively on the world market. This will therefore result in a dramatic increase of beet molasses available at local level in Germany and France and could result in Cane molasses trading at a large premium to beet molasses inside the EU.