Sugar Industry News : May 2015
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One hesitates to comment at all but we were off the bottom at the end of April, but only just with a price of 12.98 ¢/lb. However, the oil price is coming up [Brent crude hit $50/barrel in mid-January and is now trading at around $65/barrel] so there is hope of a recovery.
1.9 MILLION TONS OF PHYSICAL AS MAY CLOSES
When the March contract closed we commented on the large purchases by Sucden and ED&F Man and asked whether they were cunning purchases or the result of wrong calls. When May closed at the end of April Wilmar is reported to have taken 1.9 million tons of physical sugar, something which must be a record. Of course it could be that the purchase price was at 12 ¢/lb but could it be an error?
TEREOS’ VIEW OF REGIME CHANGE
Tereos, the French sugar coop with interests in the Czech Republic, Romania, Brazil and Mozambique, has painted its picture of Europe post regime change and it is much as expected : exports doubled to 3 million tons and imports down to about 0.5 million from the current 3.8 million. More interestingly though, it announced at the end of April that it was buying Napier Brown, a UK speciality sugar company, for £34 million. It clearly sees the closure of Thames refinery in London and a million ton market opening up to it just across the Channel.
ANTWERP SUGAR TERMINAL EXPANSION
In anticipation of the 2017 EU regime change, the owner of the Antwerp sugar terminal has announced a ‘major investment programme’ for the terminal to increase its capacity and to improve its product safety and quality systems. The project is scheduled to finish in September 2016, a year before the change.
In mid-April the Ukrainian government increased the minimum price for sugar by nearly 37%, admittedly after last year’s very modest 1% rise. The new price equates to $315 per ton at the current exchange rate. Coincidentally, the USDA country report came out the same day and gives some insight into what is behind the move : the report is expecting a 33% decline in sugar production in 2015/2016 and notes that the profitability of the industry has dropped from 37% in 2011 to just 3% in 2014.
EGYPT APPLIES TARIFF
Egypt has applied what it calls a temporary tariff of 20% on white sugar with a minimum charge of EGP 700 [US$ 92] per ton. The tariff, which may breach international agreements, is nominally for a period of 200 days but who knows how long it will remain in practice.
ETHIOPIA COMMISSIONING A NEW MILL
Ethiopia has announced that it is commissioning the Arjo Dedessa factory which is located about 250 km [as the crow flies] WSW from Addis. It is a complex story but this was a private development by Pakistanis who pulled out and sold the partially completed project to the Ethiopian government. The project had originally been granted 70 000 ha of land but is now said to be on 28 000 ha. The factory is reported to be rated at 8000 tcd.
‘EAST AFRICAN SUGAR INDUSTRY ASSOCIATION’ FORMED
It is reported that the ‘sugarcane farmers, sugar processing firms and sugar distributors’ from Kenya, Uganda, Tanzania, Rwanda and Burundi have formed the East African Sugar Industry Association [EASIA]. All but Tanzania are within COMESA. One cannot believe that the farmers really called for something like this so what was the driving force? Is it governmental or perhaps the processors?
WILMAR ENTERING SAUDI ARABIA?
We hear rumours that Wilmar may be about to invest in the Durrah sugar refinery which is planned for Yanbu, north of Jeddah. If it happens - and it is only a rumour - then that will change the dynamics of the region considerably.
INDIA CONSIDERS EXPORT SUBSIDY AGAIN
India’s federal government is again talking of an export subsidy, this time with the provision that the mills use the money to pay their farmers who are owed a staggering US$ 3 billion in arrears for their cane. It is unclear how that would work as India has not yet paid the mills for the 2014 – some would say illegal – export subsidy.
MAHARASHTRA PREDICTS RECORD CROP
The Indian state of Maharashtra has reported 9.5 million tons of sugar produced by the end of March with about 10 million tons of cane still to be crushed so by now – with the crop ended – it should have produced well over a record 10 million tons of sugar. India as a whole is predicting 26 million tons so Maharashtra will have produced about 40% of the total.
KASET THAI EXPANDING AGAIN
The Kaset Thai group operates three factories in Thailand’s Nakhon Sawan province, the flagship of which is the 50 000 tcd Kaset Thai factory. The group is now spending a further THB 400 million [$12 million] at Kaset Thai on electrifying the mills and expanding capacity to 55 000 tcd. [As a matter of historical interest, its capacity in 1988 was 5000 tcd!] Two further projects with undisclosed budgets will establish two new power stations rated at 50 MW each so that by the end of 2015 the group is saying it will have 160 MW of capacity across the three factories.
SALIM GROUP CONTEMPLATES A NEW MILL AGAIN
Indofood is again planning a new mill in Indonesia, its CEO being quoted as saying that it would prefer to build a new mill as there are very few [worthwhile] acquisition opportunities. What he did not reveal was where in Indonesia it was intended to build the new mill.
PHILIPPINES FINALLY WAKING UP?
Maybe, just maybe, the Philippines is waking up to how inefficient its sugar industry is following the agrarian reforms of 1988 which took all land holdings over 7 ha and distributed the land to the poor. That was under President Maria Corazon Aquino. Now her son, President Benigno Aquino III, has signed into law the ‘Sugarcane Industry Development Act’ with the objective of increasing the competitiveness of the sugarcane industry and hence improve the incomes of farmers and their workers through ‘improved productivity, product diversification, job generation and increased efficiency of sugar mills’. The key component of the plans seems to be the consolidation of small holdings into blocks of at least 30 ha : a small step in the right direction.
AUSTRALIA MAY BE FACING DROUGHT?
Noting that Queensland received less than half of the normal rainfall in the first quarter of 2015, Wilmar is invoking the threat of an el Niño event to raise the thought that Australia may not achieve its current crop budget. Last year’s crop was 4.7 million tons of sugar. The US Climate Prediction Centre is reporting a 70% chance of an event at the moment : watch this space!
LDC AND AMCANE APPEAL
LDC’s Imperial Sugar and AmCane Sugar have appealed against last month’s ITC rejection of their complaints about the recent US/Mexico trade deal for sugar. It is difficult to understand the basis of the appeal as both companies have reported that they support a deal.
BRAZIL PREDICTS 5% INCREASE IN CRYSTAL SUGAR
For most countries, a predicted 5% increase in crystal sugar output would not warrant a mention but the Brazilian government’s forecast for the crop that has just started is very important : 5% is about 1.8 million tons of additional sugar. It seems that the depreciation of the real – it has halved in value in the last 4 years – is driving the increase.