The following quote from the play The History Boys by Alan Bennet must resonate with most, not only those in the sugar industry. When a sixth former is asked to define history, he replies, “It’s just one f****** thing after another.” When the world was just about returning to some semblance of normality following the successful rollout of a vaccine against Covid-19, on February 24, Russia invaded Ukraine. Some two years of strife and relative isolation many had to endure, along with the interminable zoomed meetings that the pandemic ushered in, is now heralded by years of uncertainty defined by economic hardship via burgeoning inflation.
The invasion has set in motion an increase in energy and fertilizer prices, spiking production costs for both growers and millers. Sugar beet growers in Russia have not escaped price rises, with production cost in 2022 increasing by 43% as fertilizers, fuel and lubricants, seed and plant protection products cost increased by 61%, 40%, 11 and 48%, respectively. Sugar companies in Europe moved quickly to raise prices for sugar beet to encourage growers to persist with the crop next season. Cristal Union will pay €40/tonne of sugar beet for the 2023 harvest, up from €29.37 in 2021 and €35 promised for the 2022 crop. British Sugar agreed to pay growers £40 per tonne of beet for the 2023/24 contract year. This represents a 48% price increase from last year. Tereos has increased payment for beet by 40% to €41.85 in the current season. With Russia cutting off the gas supply to EU countries following the sanctions against it, sugar companies in Germany, which have relied mainly on gas for their energy source, have banded together to help each other out as they diversify their energy source. A tremendous celebration of collegiality amidst a crisis.
One wonders whether the invasion and its impact will speed up the adoption of digital agriculture, promising as it does, farming with data supporting the judicious use of inputs. At the factory level, mainly beet sugar factories in Europe, will cogenerating power with biomass/pulp be actively investigated? Will seed companies consider breeding beet cultivars with high fibre content? Not dissimilar from energy cane. Innovative solutions are invariably sought quickly when left with Hobson’s choice to find one.
Climate change is amidst us – firmly entrenched – informed by the frequency and severity of extreme weather events. According to a recent Yale Climate Connections review, from January-September 2022, weather-led disasters have caused damage estimated at over US$121 billion. Two weather mega-disasters costing over US$20 billion were Hurricane Ian in the U.S. and the European drought and heat wave. Long-term crop production forecasts will soon become meaningless, and the adage that sugar operates in a bear market with an occasional bull spike will have to be revised. Global sugar prices are currently hovering at 20 cents/lb. While analysts predict a global surplus in 2022/23, this can only be under the proviso “all things being equal”. Given the current climate scenario, it is doubtful that sugar prices will drop below 15 cents next year. Sugar will probably increasingly operate in a bull market with an occasional bear slump.