UK bakers should expect sugar prices to remain volatile for at least the next four years as global prices continue to fluctuate, according to a new report from Rabobank.
The report New Realities for the EU Sugar Industry predicted that EU sugar prices would be unstable until at least the end of the current sugar regime in September, 2015. This is largely due to doubts over whether Brazil would be able to match the growth in sugar production it has achieved over the last decade, while unpredictable weather patterns and volatile exchange rates around the world are also likely to impact sugar prices.
The report said: "The new reality for the EU sugar industry is that these global dynamics now have a very profound effect on the domestic sugar market. Sugar is no longer a commodity that European sugar purchasing managers can consider for just a few days a year, but a volatile one, which requires knowledge and day-to-day monitoring."
The European Commission announced last month that EU sugar quotas would be abolished in September 2015 a move that was welcomed by the European Sugar Users organisation. Robert Guichard, president of European Sugar Users, said: "There is a clear need to establish market dynamics in the EU sugar market. This will help the whole value chain to meet the many supply and sustainability challenges of the future."
He added: "The current system is clearly not working, supporting the call for long term change. Members continue to struggle to secure supplies making it very difficult to establish long-term supply relationships and contracts."