Insight Focus

  • Russia exports between 250-300kmt of beet molasses each year, accounting for 30% of global supply.
  • These shipments are disrupted following its invasion of Ukraine, tightening supply.
  • Higher energy and fuel costs are making shipping more expensive for those able to export.

  

Molasses is facing an uncertain and volatile times at present. We can break the causes down into three broad categories, all of which are interrelated.

Russia’s Invasion of Ukraine

The first and decisive issue has been the removal of Russian beet molasses from Western and aligned markets.

Russia exports between 250-300k tonnes of molasses a year, accounting for approximately 30% global beet molasses supply. In the short to medium term, exports to Western markets will cease and supply will tighten.

The timing of this has been favourable for Egyptian sugarbeet producers who are currently pricing their beet molasses ahead of harvest.

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Energy and Fuel Cost Inflation

So far, higher energy costs have been reflected in vessel bunker fuel and, consequently, higher freight rates. Most freight rates have increased and there’s little to counter this at present.

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Black Sea Exports Shipping Disruption

With exports blocked, either due to sanctions or war risk, we’ve seen shipments of corn, wheat and sunoil drastically fall in the Black Sea. This is being felt in two different areas.

Firstly, shipping. With an effective block on sunoil exports, the war has disrupted trading patterns for tankers used to ship molasses. It’s not clear what the net result will be, but there will undoubtedly there will be less cargo space booked and eventually a surplus of space will appear. The question, at the moment, is about the timing and location of the surplus.

The other area is the price of competing animal feed commodities (e.g. wheat, corn, barley). With the cost of most animal feed ingredients increasing, molasses may be more competitive in some markets. The issue will be in markets traditionally focussed on Russian origin beet molasses (Turkey and Spain), which will struggle to replace the molasses at a competitive level.

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