Summary
In the short term the EC is projecting an increase in EU sugar production and imports following the Covid-19 import on production and imports. When industrial usage and increased EU exports of sugar containing products are factored out the EU has a surplus of production relative to human consumption of sugar of 15.7%. More recent reports, however, suggest actual imports in 2020/21 are down, with declines in ACP exports being particularly pronounced. This is attributed to the ‘smaller EU sugar price premium.’ With this price development projected to become the norm up to 2030, the commercial prospects for ACP sugar exports to the EU27 look far form favourable. This is likely to be compounded by public health policy measures to reduce the consumption of ‘hidden sugars’ in food and drink products. ACP sugar exports will increasingly need to target sugar deficit EU27 markets, where the price premium is much higher than the EU average.
According to the EC’s most recent short term agricultural outlook report for the summer of 2021, EU sugar beet production is projected at 110 million tonnes in 2021/22, an increase of 11.1% compared to the 99 million tonnes of production in the 2020/21 season (1). EU white sugar production in 2021/2022 is projected to increase 6.9% taking it to a level 21.4% below the 2019/20 season (2).
EU white sugar production exceeds EU human consumption of sugar by 4.7%, when the use of sugar in exported products is considered. This rises to 15.7% if only domestic internal EU human consumption is considered.
If the rising use of sugar in processed food products for export is factored out (up 55.6% since 2015/16) domestic EU human consumption of sugar has fallen 14.5% since 2015/16 (2). In the immediate short term, the long-term trend towards reduced human sugar consumption has been halted by the recovery in catering sector demand (3), following the easing of Covid-19 related lockdown restrictions
However, it should be borne in mind this is largely attributable to the reclassification of the EU27/UK trade in sugar containing products as exports. It is unclear what impact the new rules of origin applicable to EU exports to the UK under the EU/UK Trade and Cooperation Agreement will have on demand from food and drink manufacturers for EU originating sugar, as opposed to imported cane sugar.
The EU domestic sugar production-to-use deficit of 4.3% is thus accounted for by the growing use of sugar in processed food products for export, and the non-food industrial uses of sugar, with trends in bioethanol production playing a major role (2).
According to the latest EU short term market projections EU imports of sugar are set to rise 31% in 2021/22, restoring EU import levels to slightly above (+5.6%) the prevailing 2019/20 level prior to the Covid-19 pandemic (2).
However, more recent EC analysis of import patterns suggests import levels in 2020/21 are substantially below projected levels (4). The EC’s 24 June 2021 sugar market situation report (4) suggested imports in the 2020/21 season were down 38.4% compared to the corresponding period in 2019/2020, with this being substantially lower that the short-term outlook reports’ projection (-16.7%) (2).
In terms of global sugar market developments, sugar prices ‘dropped sharply at the start of the COVID-19 pandemic in 2020, but fully recovered by spring 2021’ (3)
In 2020 ‘the EU average white sugar price was very stable at EUR 370-380/t’ in the face of the market demand effects of the Covid-19 pandemic, but with prices rising in 2021 towards EUR 400/t, in the face of an economic recovery.
EU-27 overall sugar balance (million tonnes)
| EU+UK | EU27 | ||||||||
| 2015/16 | 2016/17 | 2017/18 | 2018/19 | 2019/20 | 2020/21 | 2021/22(f) | % Change 20/21 to 21/22 | ||
| EU Beginning stocks | 4.0 | 1.9 | 2.2 | 2.4 | 1.8 | 2.2 | 1.1 | -47.9% | |
| EU White Sugar Prod | 14.9 | 16.8 | 21.3 | 17.6 | 17.5 | 14.5 | 15.5 | +6.9% | |
| EU Imports | 2.9 | 2.5 | 1.3 | 1.9 | 1.8 | 1.5 | 1.9 | +31.0% | |
| EU Exports | 1.4 | 1.3 | 3.4 | 1.6 | 0.8 | 0.8 | 0.9 | +13.3% | |
| EU Domestic White sugar use | 18.6 | 17.7 | 19.0 | 18.5 | 18.0 | 16.2 | 16.2 | 0.0% | |
| – Of which | |||||||||
| – human | 16.6 | 16.2 | 17.2 | 17.0 | 16.4 | 14.8 | 14.8 | 0.0% | |
| – of which use in exported products |
0.9 |
1.0 |
1.0 |
1.1 |
1.0 |
1.4 |
1.4
|
0.0% |
|
| – Industrial | 1.9 | 1.5 | 1.8 | 1.6 | 1.6 | 1.4 | 1.4 | 0.0% | |
| – of which use in bioethanol |
1.1 |
0.8 |
0.9 |
0.8 |
0.8 |
0.6 |
0.6
|
0.0% |
|
| Ending Stocks | 1.9 | 2.2 | 2.4 | 1.8 | 2.4 | 1.1 | 1.4 | ||
According to the EC analysis it was the ‘smaller EU sugar price premium’ which resulted in lower levels of EU sugar imports (3). If this is the case, then this is a very significant development for the EC’s December 2020 statistical annex, ‘Prospects for Agricultural Markets in the EU 2020-2030’ (5), projects an EU price premium up to 2030 of only €40/tonne, which would be a continuation of the ‘smaller EU sugar price premium’ (3)
According to the EC ‘exports also remained low due to a small production surplus’ (3). This contrasts with the longer-term projects for much higher levels of EU sugar exports from 2026, with by 2030 EU sugar exports being over double (at 1.9 million tonnes) (5) the projected level for 2021/22 (0.9 million tonnes) (2). From 2028 the EU is projected to be a net sugar exporter, with the export surplus rising from 200,000 in 2028 to 500,000 tonnes in 2030 (5).
In 2020/21 EU sugar ending stocks fell dramatically compared to 2019/2020 (-54.2%) but are projected to rise by 27.3% by 2021/22. This will still however be 41.7% below 2019/20 ending stock levels. In the coming years (2023-2027) EU ending stock are projected to rise to a level on average 24.3% higher than the forecast 2021/22 level, but with this falling back to 2021/22 forecast levels by 2030.
| Comment and Analysis The unexpected decline in EU27 sugar imports for 2020/21 appears to be falling particularly heavily on ACP sugar exporters. By 16th June 2021 EU sugar imports from EPA/EBA countries were down 42.2% at 333,000 tonnes compared to 576,000 tonnes over the corresponding period in 2019/20 (3). It is unclear to what extent this is a statistical anomaly attributable to the absence of complete data for UK imports of sugar from the ACP, a European market in which ACP countries traditionally played a major role. Of more longer-term concern is the potential impact of new EU/UK rules of origin for trade in refined sugar and sugar containing products. For sugar refined exclusively from imported raw cane sugar, onward trade across an EU to UK order now faces prohibitively high UK MFN tariffs. For sugar containing products, the complexity of the new rules of origin requirements for duty free access to be granted, is leading some international brands (e.g., Nestlé UK and Ireland) to turn their back on imported cane sugar for used in high sugar content food and drink products in favour of EU or UK produced beet sugar. In addition, it is unclear what the impact of the ‘smaller EU sugar price premium’ will be on ACP sugar exports to the EU. Overall EU sugar imports are likely to be down (-300,000 tonnes from 2020 levels by 2030), with reduced tariff quotas unlikely to be attractive at average EU price premiums. It is however, unclear what this will mean for duty free suppliers from ACP/LDC countries. What is clear is the average EU market price will be less attractive in the coming years. This will be particularly the case if the EU begins to establish production process requirements for sugar imports, linked to EU climate and environmental sustainability objectives. Overall, with the EU’s ‘Farm to Fork Strategy’ also working to promote healthier food consumption patterns in the EU, through public policy interventions to discourage excessive use of sugar in food and drink products, a smaller overall EU sugar market is likely to see reduced market opportunities for ACP sugar exporters on the EU market. This will require the expenditure of greater efforts on targeting ACP sugar exports to sugar deficit markets in the EU, where higher price premiums are obtainable (4). |
Sources:
(1) thedairysite.com, ‘Positive projections for EU agriculture in latest short-term outlook’, 16 July 2021
https://www.thedairysite.com/news/57194/positive-projections-for-eu-agriculture-in-latest-shortterm-outlook/
(2) EC, ‘Annexes for EU27‘Short-term outlook for EU agricultural markets in 2021’, Summer 2021,
https://ec.europa.eu/info/sites/default/files/food-farming-fisheries/farming/documents/short-term-outlook-statistical-annex_en.pdf
(3) EC, ‘Short-term outlook for EU agricultural markets in 2021’, Summer 2021
https://ec.europa.eu/info/sites/default/files/food-farming-fisheries/farming/documents/short-term-outlook-summer-2021_en.pdf
(4) EC, Sugar Market situation’, AGRI G 4 – Committee for the Common Organisation of Agricultural Markets, 24 June 2021
https://ec.europa.eu/info/sites/default/files/food-farming-fisheries/farming/documents/sugar-market-situation_en.pdf
(5) EC, ‘Prospects for Agricultural Markets in the EU 2020-2030’, December 2020 – statistics
https://ec.europa.eu/info/sites/info/files/food-farming-fisheries/farming/documents/medium-term-outlook-tables_en.pdf