LONDON - A second tranche of European Union sugar export licences is expected to be issued in early 2016, but producers will be reluctant to apply for them after a poor beet crop, trade sources said on Wednesday.
Traders said some producers may eschew the next round of export licences, likely to total around 650,000 tons, after the poorest EU sugar beet harvest in more than four decades.
The EU has introduced reforms to its protected sugar trade regime, which included the phasing out of national beet production quotas by October 2017, in order to create a fairer international trading system for the sweetener.
When an EU member state exceeds its national production quota, the surplus sugar is classified "out-of-quota". Some of this sugar is exported each year.
The EU is currently permitted to export 1.3 million tons a year of "out-of-quota" sugar under World Trade Organization (WTO) rules.
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Exports are likely to be split into two tranches of around 650,000 tons, the first of which was approved in July.
"I don't think the trade will apply for the full amount (of second tranche EU export licences)," one trade source said.
"I think producers would prefer to hold on to some of that sugar. I don't think there will be a mad rush to export it."
The EU could be heading for its lowest beet crop in more than four decades in 2015/16 due to a smaller planted area and a drop in yields triggered by adverse weather.
"With domestic values on fire, the market is effectively telling you that the export licences are unlikely to be taken up. Reduced EU exports are adding to the tightness in refined values," another trade source said.
White sugar futures on ICE were at $412.00 per ton on Wednesday, up 0.1 percent, within sight of a one-year high of $422.00 per ton touched on Dec. 4.
Trade sources estimated refined sugar prices in the EU at around 500-550 euros ($546.0-$601.0) per ton.
The Commission estimated 2015/16 EU sugar output at 14.95 million tons, sharply down from 19.51 million in 2014/15.
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"The crop is worse than initially feared," one European analyst said.
The EU may also take steps to tackle tight white sugar availability, possibly including a cut in raw sugar import duty.
"Many traders believe there will be special measures adopted, because the EU needs moresugar," one trader said.
