Sugar Technology
On-line News

February 2006

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Still an emphasis on the sugar price and the reverberations of the EU decision but also a good smattering other news this month.


Last month we plotted the sugar price and commented that it was up 70% on the January 2005 price. As you can see from the latest plot [below] the price is now double what it was last year and shows no sign of easing off. Some traders are talking of a peak at about US 25 /lb and the price had already advanced above 19 /lb as we went to press in the first days of February.

Sugar Price

We will update the graphic from time to time.


There are already signs of change in several European countries following the agreement between the states but the debate is also continuing.

The EU Parliament has voted to soften the reforms of the sugar industry as currently proposed but it is unclear what influence that will have on the final implementation. The Parliament's view is that price reductions should be less than 30% [current proposal : 39%], that transition should take longer, that triangular trade must be avoided and that new outlets like power ethanol should be encouraged.

You might want to read the Parliament's press release

Meanwhile the Commissioner has floated the idea of reducing quotas for 2006 - something that was not part of November's agreement - as the intervention stores are full of 1.5 million tons of sugar. She didn't go so far as to indicate by how much she wanted to see them cut by but it is plain from her language that she sees cuts as essential.

Greencore, the owner of Irish Sugar seems to be playing a cat and mouse game with the farmers, suggesting that it might not even be worth running its remaining factory and the farmers therefore threatening not to sow but it seems to be more to do with how the compensation is distributed - something that is not well defined in the proposals as they stand.

In Austria AGRANA, the sugar group part owned by Suedzucker, has announced that it will close two of its 11 factories in the wake of the EU decision to reform the regime.

And it isn't just sugar that is affected : one of the fall-out items from the EU's changes is Tate + Lyle's decision to close its HFCS plant in Thessaloniki. HFCS competes directly with sugar in industrial sweetener applications but its starch raw material price will not reduce in the way that the sugar beet price will as the reforms take effect.

Another European Parliament was also debating sugar in January but at a more farcical level : the UK Parliament - the 'mother of all parliaments' - debated a motion deploring Cadbury's contemplation of using French sugar instead of British. In Europe but not of it?


One of the knock-on effects of the EU decision has been the need for additional refining capacity, particularly in the Middle East where much of the European export went. Savola, the primary shareholder of the USC refinery in Jeddah and promoter of the 750 000 t/a refinery currently being built in Egypt on the Red Sea, has announced a 50% expansion for Jeddah. The annual capacity is currently a nominal 1 million tons.

Meanwhile, in Syria the Akhras group - a local sugar trader - has announced the construction of a 600 000 t/a refinery "in central Syria" to be commissioned in mid 2007. It is unclear why Homs, some 70 km from the Mediterranean port of Tartus has been selected for the location and it is also unclear whether this is the long rumoured Cargill refinery in Syria or a competitor.


On the other side of the EU change coin, Guysuco, the sugar company owned by the government of Guyana, has signalled its intention of asking the EU for $600 million to help it re-structure in the light of the changes that are taking place in the EU sugar regime. That is about 20% of the GDP of the country. In practice it will be lucky to get even $60 million.


The Indian government is forecasting an 18 to 18.5 million ton crop and has revealed that stocks fell as low as 4 million tons over the last two years of poor crops. It has said that it will not allow any sugar exports until production exceeds 22 million tons, presumably to bring back the stock levels. [Not too long ago an Indian government was voted out of office because of a sugar shortage.]

There was at least one commentary released in January which strongly questioned the current year estimate of 18 million tons of production on the basis that there was only an extra 26 million tons of cane compared to last year so how could there be an extra 4 million tons of sugar?


A local company called Josepdam has handed over 50% of the $ ~40 million purchase price of the defunct Bacita sugar company to the Nigerian government as the privatisation was completed. It seems that Josepdam is not buying the company per se as the liquidator was quoted as saying that he would settle some of the debts from the purchase price. However as the debts are more than twice the purchase price he won't do very well.

Josepdam claims that it has a technical partner from South Africa - but who?


The Sugar Industry Association of China has reported that production to date is about 9% down on that for the same period last year while sales are up 37%. However the per capita consumption is so low that the figures are not too significant in international terms.


The start of the Florida cane harvest was delayed by Hurricane Wilma and the crop itself was damaged. Current estimates seem to point to a 25% loss of sugar and an extended crop to avoid standing cane as crushing rates are reduced to cope with dirty cane. To make matters worse there was a frost in early January so some of the cane was damaged although not nearly as badly as at Christmas 1988.

Ironically, the research station at Canal Point [where the CP cane varieties come from] was quoted in January as working on a frost resistant variety.


Following last month's news item about Lacassine crushing by December 17, we heard in mid-January that the factory had still not started and that there were 3 000 acres of cane waiting to be harvested. As Louisiana cane is routinely killed by frost [it only starts growing from about March and is harvested from late September] the prospects do not look good.


The Brazilian government has stated that the country needs to invest $12 billion in its cane based sugar and ethanol industry. It envisages an additional 2.5 million ha of fields on top of the existing 5.5 million and 73 new factories. Of course, in line with its approach to the WTO on the EU sugar regime all of that investment must come from the private sector - presumably after they have repaid the suspended debts that make a nonsense of their balance sheets.


Cuba is now down to only 42 sugar factories processing cane from about 600,000 ha of land. The cane yield is so low though that only 1.3 million tons of sugar is again expected, a similar figure to last year.


Busia, not too far from Mumias in Kenya, has long been slated as the site of a new sugar mill. Cane was developed there many years ago and the area now has 4,500 ha of cane land. The cane is transported to Mumias for crushing. Mumias has now announced that it wants to almost double the production at Busia to 8,000 ha of land but as transport must be an important cost component one has to question the wisdom of that unless a new factory is to go ahead.


The Mexican Supreme Court has found that the government's 2001 expropriation of 27 failing sugar factories was illegal. The government has therefore conceded that it must reverse the decision but as it has already sold four of them and financially propped up the rest [they were basically bankrupt] the reversal is likely to be very messy for everyone, not least the new owners of the four that have bee re-privatised.


Barbados seems set to go down the high-fibre multi-output route if the recent government announcement is to be believed. It has announced a $150 million investment [it is not clear whether that is Barbadian or US so it may be US$ 75 million] in a multipurpose facility which "is expected to generate 30 megawatts of electricity, 12 000 tons of refined sugar for the domestic market, 10 000 tons of specialty sugar for the export market, 5 000 tons of specialty sugar for the local market, and 14 million litres of ethanol for the domestic market". Hopefully the 30 MW will be for some period of time?

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