London — Associated British Foods said Monday sugar production at its AB Sugar unit was set to total 1.37 million mt in its 2017-18 financial year ending September 15, up from 900,000 mt in 2016-17.
After EU production quotas were removed in October 2017, increased sugar beet planted area and increased yields pushed EU production up 23.2% for the 2017-18 season to 22.8 million mt.
That saw the domestic delivered price for Northwest Europe fall 34.2% year on year to be at Eur322/mt ($373/mt) for the first week of September.
Compounded by high production in India and Thailand, the world sugar market surplus has depressed global prices too. The London No.5 futures contract fell 13.1% to $328/mt over the past year. Those lower prices meant revenue and adjusted operating profit will be "well down" year on year at AB Sugar, ABF said.
"The current level of EU sugar prices would represent a substantial reduction on those achieved this year," it said.
Outside the EU, profitability at Illovo, ABF's African sugar venture, will be steady year on year, with production expected to increase to 1.7 million mt, from 1.65 million mt in 2016-17, as a result of suitable weather conditions and improved irrigation and crop management.
The Zhangbei and Qianqi factories in China had an "excellent campaign," the company said. Improvements in machinery and better beet storage methods led to increased sugar quality, meaning a greater operating profit year on year.
