Recently, we have seen a very rapid increase in the price of sugar in Europe. The approaching winter season is characterized by increased consumption of this sweet commodity, so let us look at why it is now becoming so expensive so quickly.
Sugar prices in the European Union are now almost three times higher than a year ago. This is mainly due to extreme growing weather and large increases in energy prices.
Spot prices for refined white sugar in the EU are around $1016 per tonne, the highest level on record. On the world market, the price per tonne of sugar is around $530, about half the EU price.
Do we need to relax import tariff-rate quotas?
The National Confectioners Association (NCA), together with the Chocolate, Biscuit and Confectionery Industry Association of Europe (CAOBISCO), have issued a joint statement calling on the governments of the United States and Europe to start taking steps to help the sugar market.
In the announcement, the companies state.
“We are urging the US and The EU Commission and Member States to relax tariff-rate quotas (TRQs) to allow for additional and faster importation of quality white sugar. Where possible, we encourage collaboration and cooperation to facilitate access to additional imported sugar supplies. There are several tools available to both the American and European authorities.”
The problem is that import tariffs on sugar are set too high to protect domestic markets.
They also mention the situation that could arise if the situation is not addressed.
“Inaction could result in factory slowdowns and stoppages in a time of global economic uncertainty. This uncertainty places a burden on the market and the consumer, especially when we look to deliver products promptly. Currently, demand far exceeds supply, and this has a ripple effect throughout the whole supply chain.”
Muriel Korter, Director General of the EU confectionery industry association Caobisco, also expressed her concerns about the EU sugar market situation on the company’s Twitter account.
During the Q&A of the #wcc2022 @murielkorter expressed the concern of CAOBISCO members regarding low sugar supplies. For the last 5 years, we have seen a deficit in the EU sugar market balance, creating a difficult environment for manufacturers. https://t.co/KPg8u0raFi pic.twitter.com/RNF7W3n0Vk
— CAOBISCO (@CAOBISCO_EU) September 9, 2022
Why is expensive energy also to blame for higher prices?
Sugar production is one of the most energy-intensive sectors in the EU and is mainly dependent on gas. It is now in short supply in Europe and its price is several times higher than in previous years.
Therefore, if we take into account the fact that most beet sugar factories run on gas, we can expect very high production costs. Another problem is that this year has been a record-dry summer, which has resulted in a slightly smaller crop. Both of these things are putting a lot of pressure on the smaller producers in particular, who may now be in big trouble.