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EUROPE: Prices ease in deficit areas as new campaign sugar comes to market

Market Summary

October 24, 2016 - As delivered white sugar prices were heard easing off modestly over the week as new-campaign sugar comes to market, there was at least one interesting disparity of note heard in the market.

A cargo of 45ic white was heard offered at Eur610/mt DDP South Italy, some Eur20 below offers in North Italy. Some sources expressed skepticism as to the feasibility of such a deal. The south of the country usually trades at a premium to the north -- reflecting the cost of road haulage from production centers.

High spot prices across the rest of the continent would make even origination of such material difficult to achieve. While waterborne freight costs are significantly lower, this would still reflect a sizable discount to what is usually expected. Should the offer remain live over the course of the week, it seems unlikely buyers would miss the opportunity to take it up in such a tight market.

Analysis continues below...

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Elsewhere, modest improvements in the quality of sugar beet harvested in the Netherlands continued in the week with Dutch cooperative Cosun reporting notably higher sugar yields at 17.1% over the past week, some 0.5 points higher than the previous week. This continues a trend in Dutch production over the course of this campaign.

Cosun added the caveat that lighter soils in the east and southeast of the country are not reporting similarly high sugar content, while dry weather in the southwest is hampering the progress of harvesting additional beet.

Sources in the ethanol market are reporting tightness of sugar beet supply has affected their business. Quality concerns raised over the summer due to prolonged wet weather pushed sugar prices in Europe up. This resulted in beet being directed primarily toward sugar production, rather than ethanol, placing strain on ethanol producers in France and Germany and providing price support.

Platts Kingsman estimates beet feedstock for ethanol will be 1.3 million mt of white sugar equivalent for the 2016-17 campaign. That figure could ultimately be lower if producers prefer to retain the beet for sugar processing. Higher world prices are already driving increased interest to export outside Europe. Historically low sugar stocks could be another factor in beet being diverted away from ethanol.

In the EU, a total of 32,327 mttq of import licenses under EPA-EBA agreements were awarded for the week ending October 19, data from the European Commission showed. It takes the overall allocations for the 2016-17 season (October-September) to 122,744 mttq.

The latest batch included the first of the season to Mozambique (25,000 mttq), Cambodia (240 mttq), and Guyana (80 mttq), with additional volumes for Mauritius (6,880 mttq), Swaziland (86 mttq) and Malawi (41 mttq). No applications were made to add to the CXL quota over the past month, as the arbitrage remained closed for North-Northeast Brazil sugars.

Volumes have already been awarded in full to Cuba, India and "erga omnes" origins totaling 332,945.96 mttq. The outstanding balance of 343,970 mttq includes 334,045 mttq available to NNE Brazil and 9,925 mttq to Australia.

Licenses awarded for raws for refining now stands at 397,903 mtwv, or 15.9% of the 2.5 million mtwv quota. The increase of 24,250 mtwv on the week was met by unspecified EPA-EBA origins. No additional raws volumes were taken from the tariff-rate quotas.

Next market summary - BRAZIL: Expectations for CS Brazil’s sugarcane performance as season enter final phase

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