Ethanol demand drives sugar market recovery

The sugar market is unsettled. As with other raw materials, the unrest in the Middle East has not gone unnoticed in the sugar market. Indirectly, the raw materials for refined sugar, especially sugar cane, can easily be used for the production of biofuel. With rising oil and fuel prices and a possible energy crisis looming over us, this provides an alternative to expensive oil. Sugar prices moved higher on both the London and New York futures markets. Records are certainly not being broken yet, but sugar did touch its highest price since last October. Part of the jump in sugar prices can also be explained by the transition from the March contract to the May contract on the futures market. A notable development comes from the United States. The American government for this summer with an exemption for the sale of E15 gasoline. In this gasoline up to 15% ethanol is blended. Ethanol is mainly produced in the US from maize. In certain regions, however, sugar is used as an alternative raw material for ethanol. The measure is intended to bring down the gasoline price in the country itself and as a stimulus for the agricultural sector. A stimulus for the agricultural sector suits American president Donald Trump well. At home, there is criticism of the US actions in Iran and the consequences of the trade war with China are also being felt by the American farmer. With an eye on the rural vote for the midterms later this year, Trump has a vested interest in doing something for that group of voters. That something is being done about fuel prices in an election year is not unique according to some experts. Technically, the sale of E15 in the summer is often limited by environmental rules that are intended, for example, to combat smog formation. The EPA is now granting emergency exemptions to temporarily lift these restrictions. Ethanol is cheaper than conventional gasoline, but it is less energy dense and can cause moisture problems, especially with large temperature fluctuations. The sugar market is quite sensitive to this kind of change in energy policy. Various sugar processors can easily switch from sugar to ethanol or vice versa. The recent developments on the global sugar market are having an increasing impact on the European situation. Due to the growing demand for biofuels, in which sugar and sugar cane are used as raw materials for the production of ethanol, prices are on the rise. This makes it especially important for European sugar producers to be alert to rapid price fluctuations and policy changes. The policy around easing regulations around ethanol in the United States can indirectly affect the European market. The importance of a stable policy for the continuity and competitiveness of the European sugar sector may therefore be even more important.