Sugar Industry News : March 2016
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WORLD PRICE
The world price bounced back from what looked like another plunge at the end of January, opening March [and the May contract] at 14.39 ¢/lb :
Analysts struggled to find a reason even though the latest ISO forecast was published with an increased deficit predicted.
EGYPT CANCELS PROTECTION FEES BUT RAISES TARIFFS
Egypt placed a temporary protection fee on white sugar imports nearly a year ago, alarmed by the increasing imports. It has now removed those fees saying they are not needed but it has increased import tariffs all round instead. Now imports of all sugar, whether raw or white, attract a 20% tariff compared to the previous 2% on raws and 10% on whites. Saudi Arabia's USC, owner of the refinery at Sokhna just 20 km south of Suez, will not be happy.
NIGERIA TALKS UP ITS INDUSTRY
Nigeria's National Sugar Master Plan is a ten year plan instigated in 2013. The government reports that it has attracted US$ 3.2 billion of investment since it started and that it has created 1000 jobs. Its National Sugar Development Council is reporting that if only the government itself would invest then the Council would create 114 000 new jobs by the end of the ten year period.
MUMIAS CONTINUES TO LOSE MONEY
Mumias has reported a net loss for the 6 months to December of about KSh1.6 billion [US$ 15 million], blaming "high interest rates coupled with a depreciated Kenya shilling". We should see things improve as Errol Johnston gets to grips with the issues, it now being six months since he was re-appointed.
SOUTH AFRICA BRACING FOR PITIFUL CROP DATA
The South African Sugar Association is predicting a production of just 1.53 million tons for the 12 months ending March 31 as a result of the current drought. The 2014/15 crop was about 2.1 million tons. Illovo has already stated that it will not operate its Umzimkulu factory this coming crop, the second crop in succession. It is unclear whether Tongaat will operate Darnall or not.
ABF OFFERS TO BUY THE REST OF ILLOVO SHARES
AB Sugar, part of AB Foods and owner of British Sugar, Spain's Azucarera and several companies in China, already owns over 51% of Illovo Sugar and now it is offering to buy the rest of the shares for ZAR 20 per share. Some would say that now is a good time to buy as the rand is so depressed but that is only true if it recovers. If it continues to fall [witness what happened to the Zimbabwean dollar] then it might not be such a good move.
PAKISTAN KEEPS EXPORTS
The government of Pakistan has not stopped sugar exports as it threatened [see February 2016 news], saying that it expected prices to fall again as the crop continued. The country has about 5 months of stock in reserve but consumption rises considerably in the period before Ramadan which starts in three months' time.
INDIAN CROP ESTIMATE STABLE AT 26 MILLION TONS
The Indian Sugar Mills Association [ISMA] is predicting 26 million tons for the current crop and for the 2016/17 crop too, despite the back to back poor monsoons. It is also confident of exporting 2 million tons [the difference between domestic supply and demand] and reports that nearly all of the exports are going to Myanmar which can only mean that the sugar is destined for China through smuggling routes.
INDIA FINALLY MOVES TO BIOETHANOL
Indian factories have been contracting to supply bioethanol to the country's oil companies which now have an ethanol obligation – if only the country had enough bioethanol. The price has been fixed at INR 47.6 per litre [about US 71 ¢/ℓ]. The companies are reported to be seeking 2.66 million m³ but the total capacity of the country is only 2.24 million if the feedstock is there.
SUGAR FACTORY BEING DEVELOPED IN ACEH
A Singapore based company called Indo China Food Industries [not to be confused with Anthoni Salim's Indofoods] is setting up a factory in Aceh province, northern Sumatra. The company already operates two factories in Vietnam and one in Cambodia. Unfortunately it is not clear what the capacity of the factory will be although we do know that all of the cane will be outgrower cane as the land area owned by the company is only 75 ha.
WILMAR NOT SIGNING FUTURE CANE CONTRACTS
When we first reported Queensland's new and controversial law giving sugarcane growers the right to decide how the resultant sugar is sold [January 2016 news] we pointed out that one of the issues would be that a miller could refuse to buy the cane of growers who want to exercise their right. Exactly that may already be happening as Canegrowers reports that Wilmar is not signing contracts for 2017 and beyond. Wilmar has said that it won't sign contracts until it understood the implications of the new bill.
Meanwhile, it is reported that an unnamed Wilmar executive gave a public dressing down to the federal government's Trade Minister when he visited Singapore. Apparently, he was told that the new law damaged Australia's reputation as a trade destination.
WILMAR WINS QSL COURT CASE
Wilmar, Tully and MSF were all disenfranchised within QSL last year by a constitutional amendment which gave them no say in QSL board appointments even though still members until 2017. Wilmar took QSL to court and won its case last month so any mill owner directors appointed since the disenfranchisement will have to be reversed. Once the three leave, QSL will only have Mackay as a mill owner.
TROPICAL CYCLONE WINSTON HITS FIJI
Tropical Cyclone Winston, with wind speeds peaking at 300 k/h, hit Fiji and its sugar industry in the second half of February. Initial estimates were that crop damage was US$ 63 million with another 10 million worth of damage to the infrastructure and a further 10 million worth of damage to houses.
IDB CONSIDERS JAMAICA INVESTMENT
The Inter-American Development Bank is reported to be contemplating a soft loan to Jamaica as part of the funding of a US$160 million modernisation of the island's sugar industry. The loan would be one third of the total project funding but it is not clear where the rest would come from. Equally, it is not clear what the project would involve other than a very general statement that the money would be used for "upgrading equipment / factories, expanding cane planting and lending to cane farmers".
BARBADOS EVEN WORSE THAN EXPECTED
Last month we noted that there were reports that the current crop in Barbados would be less than 100 000 tons of cane. The latest data is that the crop will start more or less as you read this and will be only 85 000 tons producing just 7 000 tons of sugar, just half of ISO's domestic consumption estimate of 14 000 tons.