Tereos sees good sugar beet yield in France despite drought

PARIS (Reuters) - France's largest sugar group Tereos said on Thursday it currently expects yields in this year's French sugar beet harvest to top the five-year average despite a lack of rainfall.

France, the European Union's biggest agricultural producer, has endured drought and scorching temperatures this summer, with part of the country experiencing a third heatwave this week.

"In France, crop development has progressed smoothly during the 2022 season despite reduced rainfall, and as things currently stand, the average yield for the season is expected to exceed the average for the past five years," Tereos said in a first-quarter results statement.

Final yields in the autumn harvest would nonetheless depend on weather in the coming weeks, it added.

The severe summer weather in France has raised fears of crop losses, although concerns have centred on other crops such as maize (corn), particularly in the southwest.

Sugar beet production is set to be curbed by a fall in the planted area, with Tereos noting that planting was set to decline for a fifth consecutive year.

The trend towards less sugar beet planting has led Tereos to envisage the eventuality of reducing sugar processing capacity in France. Rival Cristal Union, meanwhile, plans to raise prices paid to growers to ensure it gets sufficient supplies.

Tereos reported a doubling in core earnings for its first quarter to June 30 as high market prices offset rising raw material and energy costs.

In Europe, sugar prices were continuing to rise in the second quarter while the region's ethanol market remained supported by a structural supply deficit, the group said.

Tereos reiterated higher costs would raise its working capital needs and were expected to lead to an increase in net debt during its current 2022/23 year.

(Reporting by Gus Trompiz; Editing by Mark Potter)