How Will the EU’s Poor Crops Impact the Molasses Market?

This week, we have seen the latest forecasts for Europe’s sugar beet crop. The main areas of concern are France and Poland, with the yields forecast to be 6.2 t/ha and 5.4 t/ha lower than the five-year average respectively.

The overall EU forecast for yields could be 73.5 t/ha compared to the five-year average of 74.5 t/ha. Across large parts of Europe, we had a very dry Spring, which raised a lot of concerns about the sugar beet crop. However, since then, conditions have improved with more rain and moderate temperatures across the Continent.

What does this mean for the beet molasses market in Europe?

Supply

The main supply countries for export via vessel are Poland and Russia/Belorussia from Lithuania and Latvia.

With a below average crop forecast in Poland, we think exports will be similar to last year. The fall in ethanol prices and demand in Europe should reduce domestic demand and leave exports in line with last year. During the campaign, we are unlikely to see too many issues in terms of logistics and supply as the sugar companies have successfully sold a large proportion of beet molasses in advance, which should reduce pressure in Q4’20.

Russian/Belorussian Baltic supplies from Lithuania and Latvia are expected to be similar to last year, but we will have to monitor the market closely for any supply disruption caused by the political unrest in Belarus.

In recent years, we have seen French beet exports via the port of Dunkirk. However, due to the expected smaller exports from France, these will be very limited this year.

The majority of beet molasses is traded cross-border within the EU, rather than exported via vessels; the above commentary does not take into account these movements.

Demand

Across the EU, we expect to see lower ethanol demand for molasses, which should counteract some of the fall in sugar and molasses production. As crops are almost completely in line with the five-year average, and cane molasses import prices remain higher than beet molasses prices, we do not expect any large changes in demand across the region this season.