Ukrainian sugar producers have exhausted the annual quota for supplies to the EU and are looking for new markets
In less than 5 months, Ukrainian sugar producers have already exhausted the annual quota for sugar supplies to the EU. Ukrtsukor proposes to stop exports to the EU by 2025, and the Cabinet of Ministers is introducing a zero quota for sugar exports to Europe on June 1, although other markets are open for exports.
However, the export potential is about 1 million tons, so we need to look for new buyers, especially since farmers have significantly increased the area under sugar beet planting.
This year, Ukraine supplied 283 thousand tons of sugar to the EU against a quota of 262 thousand tons. As a result of exceeding the quota, the National Association of Sugar Producers of Ukraine called on the Cabinet of Ministers to set a zero quota for 2024 so that the country could fulfill its obligations under the EU trade agreement.
It is worth reminding that Ukraine has not entered the European sugar market in a good way – the uncoordinated work of different companies led to a price collapse, which caused dissatisfaction on the part of European producers, who asked the European Commission to regulate the market. Therefore, domestic sugar producers are now forced to comply with EU requirements, while dreaming that the quota for 2025 will be set at least at 350-450 thousand tons.
Another issue is the distribution of the quota among sugar producers. It would be logical to distribute it in proportion to production. Then companies will not be in a hurry to be the first to sell their products, thus lowering prices. Some experts believe that the quota should be distributed in proportion to the average production data for the last 3 years.
In 2023/24 MY, Ukraine produced 1.8 mln tons of sugar, with an average price of 23-24 UAH/kg in early 2024. The country needs up to 1 mln tons for its own consumption, and the maximum export volume is set by the Memorandum at 650 thsd tonnes.
The European market is interesting for Ukrainian exporters both in terms of price and logistics costs, so after the quotas are exhausted, supplies will continue to non-EU countries, including Montenegro, Macedonia, Bosnia and Herzegovina. Apart from European countries, the main sales destinations for Ukrainian sugar remain the Mediterranean and West Africa. It is also planned to resume supplies to the Middle East and Asia, where sugar was actively sold until 2022.
However, exports to Asia and Africa are complicated by unpredictable logistics, risks and high volatility of shipping tariffs. Amid disruptions in shipments from Odesa ports, the problem could be solved by a ferry service between Chornomorsk and Poti, Georgia, as well as the Chornomorsk-Georgia-Bulgaria-Turkey road route. Sugar exports across the Baltic Sea are also being considered.
In 2024, Ukrainian farmers increased sugar beet planting areas by 21%, as the profitability of grain production fell sharply. Therefore, factories are beginning to doubt whether they will be able to process all the beets grown this year.
Against this background, we can expect a sugar surplus in 2024 in the world and in Ukraine, and, as a result, lower prices, especially given the strong competition from Brazil. In 2023/24 MY, Brazil increased sugar production by 25.7% compared to the previous season to 42.425 mln tonnes, and in 2024/25 MY it will increase (according to Conab forecast) by another 1.3% to a record 46.292 mln tonnes, as the area under sugarcane will grow by 4.1% to a 7-year high of 8.7 mln hectares.
The decline in world prices amid a sugar surplus in 2024 will make it difficult for Ukrainian sugar exporters to find new buyers, especially amid restrictions on supplies to the EU. Therefore, they will have to develop interesting logistics routes and work on profitability and product quality.
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