Ukrainian sugar producers have exhausted the annual quota for deliveries to the EU and are looking for new sales markets

In less than 5 months, Ukrainian sugar producers have already exhausted the annual quota for sugar deliveries to the EU. Ukrtsukor proposes to stop exports to the EU until 2025, and the Cabinet of Ministers introduces a zero quota for sugar exports to Europe from June 1, although other markets are open for exports.

However, the export potential is approximately 1 million tons, so it is necessary to look for new buyers, especially since farmers have significantly increased the area of sugar beet sowing.

In the current year, Ukraine delivered 283,000 tons of sugar to the EU against a quota of 262,000 tons. As a result of exceeding the quota, the National Association of Sugar Producers of Ukraine called on the Cabinet of Ministers to set a zero quota for 2024 so that the country fulfills its obligations under the trade agreement with the EU.

We will remind you that Ukraine did not enter the European sugar market very well - the uncoordinated work of various companies led to a collapse of prices, which caused dissatisfaction on the part of European producers, who turned to the European Commission with a request to regulate the market. Therefore, domestic sugar producers are currently forced to comply with EU requirements, while at the same time dreaming that the quota will be set at least at the level of 350-450 thousand tons by 2025.

A separate issue is the distribution of the quota among sugar growers. It would be logical to distribute it in proportion to production. Then companies will not be in a hurry to be the first to sell their products, thereby lowering prices. Some experts believe that the quota should be distributed in proportion to the average statistical data on production over the past 3 years.

In 2023/24, Ukraine produced 1.8 million tons of sugar, the average price of which at the beginning of 2024 was UAH 23-24/kg. The country needs up to 1 million tons for its own consumption, and the maximum export volume is set by the Memorandum at the level of 650,000 tons.

The European market is interesting for Ukrainian exporters both from the point of view of price and logistics cost, so after the quotas are exhausted, deliveries will continue to countries that are not part of the European Union, in particular Montenegro, Macedonia, Bosnia and Herzegovina. In addition to European countries, the main areas of sale of Ukrainian sugar are the countries of the Mediterranean Sea and West Africa. It is also planned to restore supplies to the countries of the Middle East and Asia, where sugar was actively sold, by 2022.

However, exporting to Asian and African countries is complicated by unpredictable logistics, risks and high volatility of delivery rates. Against the background of interruptions with shipments from the ports of Odesa, the problem could be solved by a ferry crossing between Chornomorsk and Georgian Poti, as well as a road route Chornomorsk - Georgia - Bulgaria - Turkey. The issue of sugar export through the Baltic Sea is also being considered.

In 2024, Ukrainian farmers increased the area of sugar beet sowing by 21%, as the profitability of grain cultivation fell sharply. Therefore, factories are beginning to doubt whether they will be able to process all the beets grown this year.

Against this background, we should expect a surplus of sugar in 2024 in the world and in Ukraine, and, as a result, a decrease in its prices, especially given the strong competition from Brazil. In FY 2023/24 Brazil increased sugar production compared to the previous season by 25.7% to 42.425 million tons, and in FY 2024/25 it will increase (according to Conab) by another 1.3% to a record 46.292 million tons, because the area under sugar cane will grow by 4.1% to a 7-year high of 8.7 million hectares.

A decrease in world prices against the background of a sugar surplus in 2024 will make it difficult for Ukrainian sugar exporters to find new buyers, especially against the background of EU supply restrictions. Therefore, they will have to develop interesting logistics routes and work on profitability and product quality.