Record EU sugar prices leave sweet-makers with bitter taste

London, Paris, Hamburg: Record-high sugar prices in the European Union, nearly three times levels seen a year ago following extreme weather and a surge in energy costs, are forcing confectioners to consider production cuts.

The record price of a widely-used food staple is another headwind for EU policymakers as they try to control inflation and curb a cost of living crisis.

Sugar dealers and industry experts said spot prices for refined white sugar on the continent are trading at around 1,050 euros ($1,016.61) a tonne - their highest level yet. Prices in the world market, by contrast, are around half those levels.

"We are in a sugar market crisis," Muriel Korter, director general of EU confectionery industry association Caobisco, told Reuters.

"We fear our companies and especially our many small and medium-sized enterprises might soon face the difficult choice of whether or not to temporarily halt or reduce production this winter," she added.

Sugar production is among the most energy-intensive industries and is especially reliant in the EU on gas.

Benchmark EU gas prices are some 700% higher than levels seen at the start of last year, as Russia has sharply restricted supply this year.

Moscow has said the West's sanctions, imposed following Russia's invasion of Ukraine, are to blame for high energy prices.

France's two largest sugar makers Tereos and Cristal Union have brought forward the start of their 2022 production ahead of possible energy restrictions by the government this winter should the gas shortage worsen.

Meanwhile Germany's Suedzucker has posted an almost 80% rise in quarterly earnings, saying it should be able to pass on costs in the form of higher sugar prices, though its performance will depend on sufficient energy supplies being available.

"EU sugar prices are at their highest level ever. Beet sugar factories in Europe run on natural gas and look at where gas prices are," said Julian Price, consultant at julianprice.com and former President of ASSUC, the European Sugar Traders' association.

Germany's confectionery industry association BDSI told Reuters that Germany, the EU's largest producer of sweets and snacks, is in danger of losing its competitiveness even versus European countries, let alone international ones.

Germany has suffered especially heavily from cuts in Russian gas supplies.

The European Commission expects sugar output to fall by 6.9% in the 2022/23 (October-September) season to 15.5 million tonnes following a drop in planted area and a severe summer drought, while consumption is seen well in excess of those levels at 16.6 million tonnes.