Sugar Technology
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April 2003

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The sugar price is down below 8 US per lb again and, as you will see below, Brazil is not going to help by reducing output.


The government has published plans to restructure the sugar industry, shutting down older and/or uneconomic facilities and enlarging others or building new to create four production units of the same sort of size as Mumias. Presumably Mumias will be one of the four but which will be the others?

Meanwhile, Mumias itself was shut down for a good part of the month because cane transport drivers were on strike. Strangely, while the mill was closed, the growers said that they would stop delivering cane to the factory. The company was also censured by the KSB for lowering the price it pays for cane although it is not clear whether it did indeed reduce the price or whether it merely announced that it would have to with the price of sugar as low as it is.

The government is also considering converting the machinery in a non-operational car plant [it is unclear how whether the plant was supposed to make cars, make parts or merely assmeble cars] to make sugar machinery parts locally, presumably in an attempt to reduce foreign exchange expenditure and to reduce the cost of spares. Watch this space!


In a possible reversal, the SCJ has announced plans for the resuscitation of the farm land at Hampden and of the distillery. As it is not long since it announced that the factory was closing and that crushing would be done at Long Pond, it seems illogical to keep the distillery operating.


The centre-south crop started towards the end of March, somewhat earlier than usual, apparently at the request of the government which is concerned about ethanol stocks. Traders are clearly expecting this to help in terms of the ethanol shortages as prices for both ethanol and sugar have started to fall in the country. However, that may be partly because the COSAN group has stated that it will increase ethanol output by 30% this year. Don't get too excited though, they are clearly not diverting sugar to ethanol as they expect their sugar output to rise 10% too.


The government is starting to face up to the fact that its sugar industry is probably doomed and seems to be preparing its voters for the closure of the factories. In a recent speech, one minister cited a changing climate, soil depletion and uncompetitive local practices as important factors but went on to indicate that the threat to preferential markets was probably the worst threat.


After more than 2 years of delay, the Polish government has finally accepted a ruling of its own courts and given approval for France's Saint Louis Sucre to buy 95% of the Slaska Spolka Cukrowa group. Of course, since al this started Saint Louis has been taken over so it is Germany's Suedzucker which finds itself the owner of the group's 16 factories and their annual capacity of 300 000 tons.


Meanwhile, in Germany, Nordzucker has announced that it will close its Schleswig factory at the end of next campaign.


Rumours abounded at the end of the month as to who was buying Victorias Milling from the banks which currently own it. At least three major Philippines groups are interested and the tender date has passed but one suspects that the real bargaining has only just begun.


Following on from last month's article [see below] about CSR publishing its demerger plans, the shareholders have voted 'overwhelmingly' for the action.


The EU's Commission has received the first of the two reports which it commissioned on the EU sugar regime. Apparently the recommendations will not make pleasant reading for the beet growers : a cut of more than 50% in the intervention price is called for. The second report is expected in June but neither report will be immediately published. Whether the recommended reforms go through is another matter however as the farmer voters will be very much against reforms of any nature let alone such severe cuts.


Cuba's crop forecasts for the current year are much in line with predictions and therefore nowhere near budget. Readers will remember that the government closed about 70 mills after last crop, claiming that the closures would save US$ 200 million and the remaining 85 factories would earn US$ 100 million with a crop the same as last year : 3.6 million tons. It now looks as if it will only manage 2 million tons, a figure which should perhaps be compared with the 8.1 million produced in the late 1980's.


Local investors are claiming that they are going to establish a new sugar estate on the Kafue flats. However, the scale is very small with 2 000 ha being set aside for the estate and the initial factory capacity set at only 1 000 tcd. The owners claim that US$8 million worth of factory equipment is already in the country and the remainder has been despatched. There was no hint in the new story of the country of origin of the equipment.


Following the sudden stop placed on the privatisation of Kinyara Sugar Works towards the end of last year, the government has announced that it will now divest entirely from the company. The original plan had been to sell off only 51% of the shares.


How long does it take to replace a sugar industry chief executive? Nine months apparently. Following the departure of Larry Pillard, T+L has finally announced the name of its next Managing Director: Iain Ferguson, a long serving executive of the giant Unilever group and currently Senior Vice President, Corporate Development. Pillard's departure was announced on June 14 2002 but Ferguson's appointment was only announced on March 24 2003.

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