MONTHLY MOLASSES MARKET REPORT
Date: August 2019
With the price of cane molasses increasing, beet molasses demand from the fermentation and EU feed markets have also increased, which has naturally been followed by the price levels. Planted acreage of this winter’s crop is significantly lower than last year, however the sharp rise in price we saw last year was due to the effect of the drought, rather than initial planted acreage. It was hoped that even average conditions for growth during the growing season should result in a significantly higher molasses yield year on year. However dry weather across Germany and Poland has called this into question somewhat and we are still waiting for final yield test results.
As mentioned above, the demand for cane is certainly dropping as we enter the final stages of Q2. A high quality and high quantity of grass across the UK and northern Europe has meant that feed demand overall is down, and the fermentation/EU users switching to beet has had a large impact on this.
Pakistan was expecting a successful harvest season with a potential for record levels. This has not quite come to fruition, and there is a slightly smaller crop than expected. The rise in oil price has made Pakistani ethanol more attractive and they will look to use molasses as a stock for the coming season’s production. High ethanol demand from the Philippines and Japan mean molasses exports will be non-existent for this harvest season.
India has had a very large crop this year and as we move into the second half of the year, it was expected that this will be the only origin with product available for export.
Exports however have slowed down significantly in recent weeks as prices remain extremely high due to large ethanol demand.
Thailand has had its highest molasses crop ever this year and has even been exporting product to Asia, rather than being consumed by local state ethanol programs as per recent history. The crop however is now finished and the prices of the new crop look to be at parity, even despite the fact a smaller crop is expected.
Indonesia will have a similar sized molasses yield to last year, however most of this will be exported to Korea and the rest of Asia. Australia’s crop was severely drought affected and will be the first time it fails to export any cargo to the Asian market.
Very strong ethanol programs in Japan, Pakistan and The Philippines have caused an upward movement in FOB prices as they are prepared to pay significant premiums for high sugar molasses. However, if prices continue to rise, it may become more cost effective to import finished product ethanol.
USA – USA have also had a very poor beet crop this year, meaning Floridian cane will mostly be used within the USA.
Central America – Early prices for new crop look to be at high level as strong EU demand and internal ethanol demand drive pricing levels.
The low Sulphur fuel charge that is going to come into play will cause a large increase in freight costs. Not only will the bunker costs increase, the fact that only certain refineries around the world can product this will also have a big impact on tanker costs.
Low Sulphur will have to be transported around the world in tankers, meaning a reduction in availability and an increase in prices.
FOB prices are at a relatively high level compared to recent times, however they are by no means at the highest level traded over the past 5 years. The reason CIF UK prices are so high is due to the pound being at $1.21, the last time FOB prices were this high, the pound was around the $1.50 level and resulted in prices similar to summer 2019.