London — Sugarbeet yield estimates have been downgraded across Belgium, France and Germany on account of the drought, but this has not given a bullish impetus to the European ethanol market as ethanol production is still set to be maximized by beet-based producers.
In Belgium, the first test by ISCAL Sugar on August 6 showed an average beet yield of 45.2 mt/ha, down from 58.8 mt/ha last year and the five-year average of 51.3 mt/ha, while sugar yield was estimated at 7.9 mt/ha, a drop from 9.6 mt/ha a year ago but in line with the five-year average of 7.8 mt/ha.
Results from another Belgian operator, Raffinerie Tirlemontoise, on July 30, estimated an average sugar yield of 8.937 mt/ha, down from 10.847mt/ha a year earlier, while the sugar content rose to 18.76% from 16.63%.
In France, the Beet Technical Institute (ITB) revised down its sugar yield estimate for the campaign to 13.6 mt/ha from 13.9 mt/ha in its July forecast, due to the adverse weather of the last weeks. This is below last year's estimate of 14.8 mt/ha and the five-year average of 13.92 mt/ha.
In Germany, seed producer Strube conducted on July 30 its first round of beet tests in southern Germany, which showed beet yields below last year at the same time but in line with the five-year average.
The beet yield in the three regions tested averaged 53.7 mt/ha, down from 65.4 mt/ha at the same point in 2017. On the other hand, sugar content and yields were estimated above last year's level at 19.2% and 10.3 mt/ha, from 15.1% and 9.9 mt/ha in 2017, respectively.
But the southern regions of Germany have been less impacted by the drought than northern regions. Next week, new tests are expected in other regions of the country, which will give a better overview of the situation in Germany.
The announcement of lower yields failed to provide any support to either domestic sugar prices or forward ethanol pricing.
On the sugar front, European stock levels are still high according to market sources and weighing down on prices. European Commission data provide an indication by showing stocks up 3.885 million mt on the year at the end of May.
On the other hand, the rain arriving at the end of this week, and forecast to return next week, should come early enough in the season to go some way to revitalizing the crop in France and the UK.
On the ethanol front, values have gained some momentum recently in response to rallying grains prices, but not quite as much as to salvage the margin lost to expensive feedstock.
Sources attribute this to the sustained comfortable supply situation for European ethanol, set to become heavy once again when the sugarbeet harvest begins and beet-based ethanol volumes start flowing into the market.
Despite the downward revisions to sugarbeet estimates, the ethanol-sugar pricing dynamic still favours ethanol production so that lower yields will likely mean less sugar rather than less ethanol produced, should the current parity scenario persist.
Of course, overall beet availability will be lower than last year, which was an exceptional year. But if ethanol is to be maximized, many fear a hit to the market similar to the year before.
In the meantime, sellers will be keen to shift the last available volumes of both sugar and ethanol before the arrival of the new crop, therefore keeping a lid on both spot and forward pricing.
