Sugar Industry News : April 2018
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WORLD PRICE
The world price plunged further in March :
Some analysts are even talking of 10 ¢/lb but as the industry is already struggling at the current low it is difficult to see how it would stay that low for long.
BUNGE STRUGGLES TO SELL
Rumours have it that both Nordsucker and Wilmar considered buying Bunge's sugar trading arm but both decided not to proceed. Apparently, Bunge want $75 million for the business but nobody finds that attractive so potential buyers are just waiting for the business to be wound up when traders will come looking for jobs [assuming that they wait for the end] and more physicals trade will be available for the remaining competition.
It is also becoming clear that one of the reasons for the rumours about Bunge being a take-over target not gelling is that nobody wants the sugar assets that Bunge has in Brazil [and cannot sell].
EUROPEAN BEET CROP SOWING DELAYED
Sowing of the European beet crop is being delayed by poor sowing conditions, particularly in France where the fields are still very wet. Tereos, for instance, reported that its farmers had not sown any seed on a day when 50% of the crop had been sown in 2017. The optimum drilling period ends in early April so yields are predicted to be significantly lower than last year's campaign.
TURKEY STARTS TURKSEKER PRIVATISATION
Turkey has long talked about privatising Turkseker but has never progressed the idea until now. The Privatisation Administration is currently inviting proposals for the purchase of 14 of Turkseker's 25 factories. It is reported that the factories for sale are in Eastern Turkey where beet agriculture is not particularly successful. Whilst one can see that such sales will help Turkseker, they won't make for a successful privatisation.
GOLDEN STARTS WORK ON ITS SUGARCANE ESTATE
Golden Sugar, the Lagos refiner owned by Flour Mills Nigeria, has 'inaugurated' its proposed Sunti estate which will be located on the Niger about 220 due west of Abuja, the federal capital. The budget is reported to be about US$ 140 million for a 17 000 ha estate and a 4500 tcd factory. The aim is to produce 100 000 tons of raws per year. No timescale was given.
METAHARA ABOUT TO REOPEN
Metahara, one of Ethiopia's original rift valley factories, is about to be re-open following the severe damage sustained last [northern] summer in a thunderstorm. The loss of production over the last seven months is reported to have badly affected sugar supplies in the country.
KENYAN PRIVATISATION STILL NOT PROCEEDING
The deputy President of Kenya is reported to have said recently that the government is prepared to just give away its ownership of the five publically owned factories 'so long as it will be for the benefit of the sugarcane farmers'. What is not clear is whether that would also mean writing off the debts of the five, debts which currently total about US$ 900 million(!).
INDIA RE-INTRODUCES EXPORTS
Last month the federal government in India issued two sugar export/import decrees in the light of current production estimates. The first permits the export of up to 2 million tons up to September 2018 and the second permits the import of raw sugar in the period October 2019 to September 2021 equal to the amount exported. Each factory has an allocation and the allocations can be traded.
Let's look at some numbers though. First, the world price is currently low [ironically, in part because India has announced the export permits] so any export will lose money unless the government subsidises and that would breach WTO rules. Secondly, the closing stocks at September 2017 were less than two months consumption and if there are no exports the closing stocks this coming September will be only about 4 months consumption, a figure that government has felt is comfortable in the past.
TAMIL NADU IS STRUGGLING
While the rest of India is predicting high, if not record, crops Tamil Nadu seems to be still caught in an ongoing drought. The South Indian Sugar Mills Association is predicting the 2017/18 crop to be only 600 000 tons compared to about 2.5 million a few crops ago. That helps put the magnitude of the crops in other states as central ISMA continues to forecast national production at 29.5 to 30 million tons.
THAI CROP RECORD PROBABLE
The Thai government's policy of switching out of rice in favour of sugarcane seems to be having an effect on that country's production. The 2017/18 crop was also favoured with good weather [unlike recent years] so the combination of extra area and good yields is forecast to deliver about 12.5 million tons.
BRAZIL DIVERTING STRONGLY TO ETHANOL
Brazil is forecasting a strong move in favour of ethanol as the new crop starts, resulting in as much as 5 million tons of crystal sugar out of the market during 2018. Part of the drop in production [perhaps 20%?] is the same old problem : the estates have not been ploughing out and replanting when they should. The main reason, however, seems to be a deliberate decision to bring the world price back up.