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Again some interesting news and a greater price stability - we hope! :
The world price has at last stopped the crazy upward climb, in part because the EU sold an extra 500 000 tons [see below] but probably more because reality is kicking back in, the EU move just prompting the inevitable correction. The price closed the month at a much saner 24 ą/#.
Another part of the equation was probably Egypt’s refusal to buy [it is looking for 500 000 tons], following Indonesia’s similar move last month.
Nothing has really changed in the physical sense : India will still be 7 million tons short this year and although Brazil has standing cane to add to this year’s harvest even it cannot gear up to produce millions of additional tons that quickly.
The white premium has been hovering around the $100/t for the last 12 months [although it did plunge below 50/t for a very short time during the northern summer]. The sudden drop in the raws price has spiked it up considerable however : it reached a remarkable 150/t during February and analysts are predicting it will stay high, some even mentioning an unbelievable 300/t.
Following on from last month’s news item about calls from within the EU to export more out of quota sugar, the EU did indeed grant permits for an additional 500 000 tons, sparking complaints from Australia, Brazil and Thailand to the WTO. However, judging by the loud but non-aggressive tone coming from the three after a WTO meeting at the end of February, their case was not well received. One could even argue that the three acting in concert are creating monopolistic conditions, forcing up the world price.
ROYAL DUTCH COSAN
In a major move, Shell has bought into bio-ethanol in a big way with an investment in Brazil’s Cosan, the largest of that country’s cane millers. In addition to putting its Brazilian fuel distribution business into the 50 : 50 joint venture, Shell is placing $1.63 billion over the next two years. Shell is reported to be looking to increase the new company’s ethanol output from the current 2 billion litres to 5 billion.
BRITISH SUGAR’S ‘CORE ESTATE’
British Sugar grew beets on 1600 ha of rented land in the cycle just finished and wants to more than double that to 3300 ha for the sowing season about to start. It says that although it gets lower yields than average [it is, after all, still learning] it can produce at a cost less than buying from farmers. It stressed that all the beet grown is out of quota and destined for the Wissington ethanol plant.
The Akhras refinery near Homs is reported to be ready to start melting this month. We also hear that Cargill is pulling out of its joint venture with Assaf for the troubled first refinery at Homs but that is not confirmed.
In January’s news we reported that the millers in Uttar Pradesh were paying farmers up to Rs 205 per quintal for cane, despite the state having set the price at Rs165 to 170/q, a reflection of the shortage in northern India. We now hear that millers were paying up to Rs280/q in February, just to get some cane. Nearly a quarter of the state’s mills have given up the struggle and have stopped crushing already, as have a lot of mills in Maharashtra further south.
In the deep south the problem seems to be different : the cane is there but millers cannot get enough cane cutters to bring in the harvest.
With the start-up of the Parry/Cargill refinery in Kakinada, Andhra Pradesh, swing refineries seem to be the flavour of the month. Shree Renuka has one over on that coast and is said to be planning one in the west and Simbhaoli has announced that it will build a 1000 t/d RSO one in the Gujarati port of Kandla.
Meanwhile, Shree Renuka has moved again to strengthen its raw sugar supply, this time by buying 51% pf Brazil’s Equipav group for $329 million. Regular readers will remember that it bought its first Brazilian mill towards the end of last year.
In a move unlikely to please Tate & Lyle, the European Investment Bank has agreed to loan Omnicane [one of the new sugar company groupings on the island] €15 million to finance expansion of its refining capacity. T&L is struggling to find sufficient raws to operate its Thames refinery as the impacts of the regime change and EBA start to bite.
Cambodia’s Mong Reththy Group has announced that it is in discussions with an unnamed French company to build a sugarcane factory able to produce 80 000 tons of sugar annually. The project is reported to cost $100 million.
CSR has appealed against the Federal Court ruling blocking the proposed demerger of its sugar division. It is claiming that the ruling contained ‘errors in law’.
USSC AND FLORIDA
Florida’s deal to buy 73 000 acres of US Sugar’s land for environmental purposes is back in the news with the state’s Supreme Court setting a date to hear the case brought against the deal by the Miccosukees and Florida Crystals. The problem seems to be that the date set – April 7 – is after the deadline set for court approval so the state will have to go through another round of extension hearings.
Jamaica has shipped its first sugar for Eridania as it became clear that the $15 million already paid was just an advance to help SCJ with its cash flow problems : the price is guaranteed to be at least €335.20/ton.
By the end of the month however the picture was gloomy again as Eridania said that it was not interested in a long term relationship or the outright purchase of SCJ.
It would seem that the dispute, reported here previously, between India’s Overseas Infrastructure Alliance [OIA] and Uttam Sucrotech is not resolved after all. The Ethiopian government has warned that the whole deal will be cancelled. The issue seems to be that each won part of the factory work but then OIA was awarded a managing contractor role without any price increase so it wants to retain 15% of Uttam’s contract price …
Mumias has been given a 25% increase in its selling price for electricity : up from 6 to 8 USą/kWh [not the 8 USą/MWh reported in the press!]. It has also stated that it expects to start work on the Tana River project we have heard so much about over the last couple of years. The project now has Cabinet approval and the Environmental Management Authority has given approval as well, subject to confirmation of water availability.
The project is required to grow rice initially – presumably because it is just an annual crop – to demonstrate that the local water resource is able to support large scale agribusiness. The project is destined to use 16 000 ha, the majority of it being a core estate.