Opinions Focus
- EU molasses supply hit by poor beet crops.
- Difficulty persists in shipping Russian molasses from Black Sea.
- Cane molasses supported by higher tanker rates.
European sugar beet campaigns will begin this month. The outlook is for lower production, lower sugar yields and lower molasses production. Broadly across the Europe, the exceptionally dry weather in recent months has negatively affected sugar beet crops. We may also see a shorter beet processing campaign as the cost of energy in Europe may restrict the timeframe sugar factories can operate profitably.
The main export supplier of beet molasses will be Poland, which is forecast to see a fall in beet molasses exports via sea vessels from 220,000 mt in 2021/22 to 150,000 mt in 2022/23. Other supply sources will be limited or non-existent. There will be options from the Baltic for Lithuanian or Belorussian beet molasses but this will not offset the fall in supply from Poland. Russian beet molasses exports are difficult to forecast due to the challenge of shipping from the Black Sea and sanction risk.
European beet molasses buyers have responded to the lower production estimates by coming to the market early and taking longer dated cover. The incentivisation to increase early purchases is not just being driven by the lower production estimates but also by lack of competitive imported molasses options.
In terms of beet molasses import options, only Egypt and Russia are available as sources. Egyptian prices are less competitive as the tanker freight rates have increased in recent months. Russian beet molasses will be available, however there is the challenge of shipping from Russian ports in the Black Sea and also sanction risk. Russian beet molasses has not been sanctioned directly by the EU, UK or United States; however, beet pulp pellets are on the EU sanctions list.
Cane molasses import prices have remained at a higher level as they are primarily being inflated by higher tanker freight rates, despite a fairly stable FOB price across the majority of supply sources.
Overall the picture for the beet molasses market is for a tighter supply situation due to lower sugar and molasses production from the 2022/23 crop and a shorter processing window. We may see a two-tier market with lower-priced Russian beet molasses exports but a tighter EU beet molasses market. The condensed processing campaign for sugar beet may see lower quantities being available in 2023. There could be a much-reduced thick juice campaign next year as sugar companies prioritise production in the short term to limit their exposure to energy prices in the longer term.
