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Quite a mixture :
We closed last month’s note on the world price by saying that it seemed to be stabilising at around 17 ¢/lb : it didn’t and has now decayed to more or less 14 ¢/lb, not surprising when you see what India and Brazil are forecasting. However we all know that India cannot seem to get its forecasts right and Brazil demonstrated last year what the weather can do.
Last month we were critical of India for not being able to forecast its crop reliably [the latest estimate had gone up from 15 to 17 million]. No sooner was that published than the Food Ministry was saying it now expected 18 million tons for this year and was predicting 23 million for the 2010/11 year which would put the country more or less in balance. The basis for the forward estimate was the very high cane prices being paid earlier this year but now that the world price has collapsed it is difficult to see those being repeated.
OPTIMISTIC BRAZIL FORECAST
As usual, the crop forecast from Brazil’s Ministry of Agriculture makes fascinating and mind blowing reading. The land area under cane is reported to have increased by about 9% to 8 million hectares [about 20 million acres or feddan] from which 664 million tons of cane are expected to be harvested. That is a 10% increase on last year but will depend on the rains of last year not being repeated. The ministry expects nearly 55% of the crop to go to bioethanol, producing 28.5 billion litres which should result in 38.7 million tons of sugar.
Meanwhile, Petrobras – the state oil company – has announced that it will buy ~46% of Guarani, the group controlled by France’s Terreos group. That emulates the recent purchase of a 50% stake in Cosan by Shell.
US SUGAR / EVERGLADES
A US Federal Judge has instructed the State of Florida to resume work on a major reservoir project which it had halted just before announcing plans to buy [at that stage] all of US Sugar’s 183 000 acres of land. Opinions vary but some are saying that such a move would signal the end of the proposed purchase deal, now limited to about 73 000 acres.
TATE & LYLE BUYS FROM JAMAICA
Ever since Mauritius started down the path of value added refining, Tate & Lyle has struggled to find enough raws to process at its Thames refinery in London. As with most refineries, it only makes money when running close to maximum capacity. Tates has now struck an advanced purchase deal with Jamaica similar to that which the island agreed with Eridania last crop. This deal gives Jamaica $46 million in advance for 100 000 tons of raws in exchange for a 50% share of the profit from selling the sugar if the price is over €370/t.
Following the privatisation of Kinyara in 2006 [how time flies!], the government of Uganda has announced that it intends to sell its residual 49% of the company early next year. Before then you can expect lots of negotiations with outgrowers demanding that they have some of the shares – no doubt for free.
Despite the low production, Zimbabwe contributed US$ 73 million to Tongaat Hulett’s profits last year. The crop produced only 259 000 tons from the two factories, each of which is capable of producing in excess of 200 000 tons. As ever, the problem lies in the fields where the owners were displaced by the government in order to hand out land piecemeal.
SOUTH AFRICA WANTS EU ACCESS
SASA, South Africa’s international sugar sales organisation, is trying to make the case for that country to have access to the EU’s preferential sugar market. No doubt it will be supported in that by Tate and Lyle which is struggling to find enough raws to refine at London’s Thames refinery [see separate article]. South Africa is too developed for access via the EBA mechanism.
Indonesia has reduced its crop forecast by nearly 10% in advance of the start of crop due to heavy rains close to harvest time. That means that, even with the expected 4% increase of land area under cane, the crop will hardly be bigger than last year’s which will require even more imports. If you analyse the data available , you can see why the country has to import about 2 million tons a year : it only produces 6.2 tons of sugar per hectare.
MARYBOROUGH, TULLY AND NOW BUNDABERG
Regular readers will have followed the various attempts by Maryborough to merge with [take over?] Tully over the last year or so and Tully’s March response to float on the stock exchange so that it could buy Bundaberg's northern mills. Maryborough’s response was swift with Bundaberg agreeing to a deal with that company to ‘jointly own’ the northern mills. Maryborough will pay Aus$ 20 million plus half of its Mulgrave mill for the joint ownership, a preliminary step to total ownership which leaves Tully out in the cold : watch this space!
CSR / SUCROGEN
April was an interesting month for CSR, starting with an increased bid from China’s Bright Food and ending with the court of appeal agreeing that the company should be free to demerge its sugar division – now called ‘Sucrogen’ – if it wished. There was also an unconfirmed contact from a Japanese group.