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April 2005

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March was a month of mixed messages for the sugar price with some people bearish [the price fell away from about 9 US¢/lb to 8.5] and others bullish – see below. There were quite a lot of other stories too.


Rabobank, one of the most important banks for the sugar industry, has been predicting further increases in the sugar price because of the effect of the crude oil price on ethanol production in Brazil – and that was before the press started predicting $100/barrel oil. If oil really does reach that level in the near term then Brazilian producers are bound to switch to the limits of their ethanol capacity. Add that to the concerns about the crop reported below and a substantial increase in the world sugar price looks inevitable.


The expected increase in the 2005/6 crop is being cut back by forecasters as drought grips Brazil’s Center-South region, the more important of the two. The 2004/5 crop was 327 million tons and the original forecast for 2005/6 was 360 million but this has already bee revised down to 350 million and there is end to the drought in sight.


St Kitts has just started its last sugar crop for the foreseeable future, partly in response to the proposed EU sugar regime. The state-owned industry has made annual losses for many years so its demise was inevitable with production costs as high as they were. It could not make a profit even though all of its production went to the EU as preferential quota.


TH published its annual report at the end of March : quite a positive report at that. The report also gave a bit more information about TH’s direct white project. The process has the acronym WSM and the current project [we called it a semi-production scale unit last month] is scheduled for completion in November this year.


The government in Cuba is predicting a "violent drop” in output next crop as a major drought grips the eastern part of the island : the reservoirs in the east are reported to be as low as 32% of normal capacity. Fidel Castro himself was reported as saying that the crop could be as little as 1.5 million tons. If oil now does go to $100/barrel then where does Cuba go?


The Swazi sugar industry must be in a really bad state if the government is seeking help from Cuba but that is what was reported last month.


Despite the fact that last year was the first profitable year for the country’s sugar industry since 1995, the Vietnamese government has pledged to spend “at least $126 million” shoring up the industry’s public sector factories. Presumably the idea is that if they pay off their debts they will continue to be profitable.


South Nyanza sugar is saying that it wants to double capacity and to adopt export co-generation [up to 16MW]. Unfortunately it is ignoring its almost annual losses and is asking the government to forgive that debt [it expresses the thought as converting the debt to equity but as the government already owns the company ….].


Negotiations in March seemed to offer an end to the Yonkers strike but eventually collapsed, leading to renewed picketing by workers. It is now over three months since the strike – centred on new contract negotiations – started.


The warm winter has resulted in an estimated 15% loss of beets harvested at Michigan Sugar due to rotting. [The beets are harvested in the autumn, allowed to freeze naturally and then processed from frozen.] The farmers that own the co-operative are expected to make a loss of $7 to 9 per ton of beets.

Although it says that it is not related, the company has also announced the closure of its Carrollton factory. Strictly speaking it could reopen but that is very unlikely.


China is forecasting another 1 million ton shortfall this year, similar to last year’s figure. Last year the country imported about 1.2 million tons. This year the crop is expected to fall due to adverse weather conditions but consumption continues to rise so the government will presumably have to dig deeper into its reserves to hold the imports at last year’s levels.


Sri Lanka has announced that the Guangdong Economic Corporation wishes to invest $50 million in bringing the Kantale sugar factory back into production. It has not operated for the last 12 years. The figures talk of a 8 500 acres [not hectares] of cane land but a factory capable of making 1 200 tons/d of sugar. One suspects that the report means 1 200 tcd.


Instead of reforming its existing laws that control the sugar industry [see the 05/04 news] , the government of Thailand is now floating the idea that it might scrap them and replace them with a simpler system. The new law would still see farmers selling cane to the millers rather than being a profit share arrangement so it looks as if the net result will be the same as previously reported.


Eastern Sugar, a joint venture between Tate + Lyle and Saint Louis Sucre, is claiming compensation from the Czech government because it “did not protect the sugar market from illegal imports”. It will be interesting to see if such a case succeeds.


British Sugar is claiming the world title for best beet factory having finished a very successful campaign. It processed about 2.4 million tons of beets and, on one day, managed a rate of 18,503 tons/d. Although some European factories have higher daily slices they have shorter campaigns and in the US the daily rates are lower because the campaign is much longer.


Amalgamated Sugar looks set to adopt a ‘Roundup Ready’ beet following the full approval of H7-1 by the US government in mid-March. The company has already started to prepare the public for this step even though it says that transgenic [aka GM] crops do not seem to be an issue in the USA.


The US subsidiary of a European company is starting to market a complex mixture as new ‘zero calorie’ sweetener. As the mixture includes various fruit extracts and chicory root fibre it is difficult to see how it can truly have “no calories”.


Brazilian authorities are implying that people are catching Chagas disease, a potentially fatal ‘tick-bite fever’, from drinking contaminated cane juice. In the most recent outbreak over 10% of the 45 victims have died.

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