The European sugar market in a post-quota environment

Transcription

1 The European sugar market in a post-quota environment NFU & British Sugar Growing Beet after Quotas: The Options Peterborough, LMC International,

2 Quotas will end on 30 th September 2015 this will represent a major change. Today, sales within the EU are carefully managed by quotas. There are also limited markets for out-of-quota beets. EU s current supply base (million tonnes) Quota Out-of-Quota Beet sugar 13.5 Chemical industry 0.7 Isogluose 0.7 Ethanol (sugar equivalent) Imports Exports (WTO limit) 1.4 LMC International,

3 Abolition of quotas will give the beet industry the opportunity to expand to supply more sugar to the: Internal market (no quotas). Export market (no WTO limit). But, the industry will face competition from: Internal market: imports and isoglucose. Export market: world sugar suppliers. LMC International,

4 Cost competitiveness will ultimately determine the EU s sweetener supply base after quotas. Each sweetener supply source has different moving parts. Supply source Influences over competitiveness Beet sugar Isoglucose Imports Alternative crop prices, energy prices Maize/wheat prices, energy prices World sugar prices LMC International,

5 Each of these elements plays a different weight in sweetener producers costs. Beet sugar & isoglucose: cereal and process fuel prices & currencies. Refiners: world sugar prices. Key elements in sweetener producers costs indicative values Beet sugar Isoglucose Refined cane sugar Return from competing crop Grains price World raw sugar price Cost of growing sugar beet Co-product values (credit) Regional + pol premium Beet transport cost Net cost of grains Raw sugar transport to EU Full cost of processing (net of by-product values) Full cost of processing Full cost of refining (incl. pol loss) Sales costs + logitics to customer Sales costs + logitics to customer Sales costs + logitics to customer per tonne per tonne per tonne LMC International,

6 per tonne per tonne per tonne Each of these cost influences is very volatile. This makes it very difficult to predict how profitable: a) Beet will be relative to alternative crops. b) Beet sugar will be relative to imports / isoglucose and how attractive world market exports will be. 200 Wheat price World white sugar price Oil price LMC International,

7 But, beet is doing well in terms of yield growth. a) against alternative crops across the EU. Index of yields (1995 = 100) 160 Index of Index of EU beet, maize and wheat yields Beet Maize Wheat Rapeseed LMC International,

8 Index of yields (1995 = 100) Index of yields (1995 = 100) But, beet is going well in terms of yield growth. b) against cane sugar. 13 Sugar yields 200 Index of trends in sugar yields EU-28 Centre/South Brazil Top exporters EU - Beet Centre/South Brazil Top exporters LMC International,

9 Conclusions LMC International,

10 End of quotas will be an opportunity for efficient beet sugar producers to expand to supply: a) the internal EU market b) the world market But there will be uncertainties and risks: Level of isoglucose production and imports is uncertain. Beet sugar output will depend on: How many member states expand or continue to produce after Weather. Prices will be volatile and may differ between the internal market and the world market. LMC International,

11 Implications for beet supply contracts. At the heart of the issue is a dilemma: Growers can adapt their farm rotation in response the relative prices of alternative crops. Flexibility has a value. Processors have high fixed costs and therefore want to maintain high throughput. Variable throughput has a cost. Many beet companies in the EU will be able to address this issue through their co-operative structure. In the UK, contract terms will be key to allowing growers and processors to maximise the industry s potential post-quotas. LMC International,

12 Thank You LMC International,

13 Oxford 4 th Floor, Clarendon House 52 Cornmarket Street Oxford OX1 3HJ UK T F info@lmc.co.uk New York 1841 Broadway New York, NY USA T +1 (212) F +1 (212) info@lmc-ny.com Kuala Lumpur B-03-19, Empire Soho Empire Subang Jalan SS16/1, SS Subang Jaya Selangor Darul Ehsan Malaysia T info@lmc-kl.com Singapore 16 Collyer Quay #21-00 Singapore Singapore Tel: info@lmc-sg.com LMC International, 2015 All rights reserved This presentation and its contents are to be held confidential by the client, and are not to be disclosed, in whole or in part, in any manner, to a third party without the prior written consent of LMC International. While LMC has endeavoured to ensure the accuracy of the data, estimates and forecasts contained in this presentation, any decisions based on them (including those involving investment and planning) are at the client s own risk. LMC International can accept no liability regarding information analysis and forecasts contained in this presentation. LMC International,