Sugar Industry News : May 2018
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WORLD PRICE
The world price continued the downward plunge in April :
Of course the graph doesn't show the whole truth : the price went below 11 ¢/lb towards the end of April but managed to open May at 11.69. The real has also started on a downward trend ... following the world price again?
ALVEAN SAYS PRICE WILL ONLY RECOVER IN 2020
The CEO of Alvean is reported to have said that not only will the world price go lower than current levels but that it will not recover until 2020. Alvean, in case you missed it, is the Cargill / Copersuco joint venture in sugar trading.
POOR RESULTS FOR AB SUGAR
AB Sugar [British Sugar, Azucarera Ebro, Illovo and others] has reported half year profits down 27%. It exonerated Illovo and laid the blame squarely on the 'significantly lower EU prices which adversely affected our UK and Spanish businesses' resulting from the end of the EU regime. However it also claims that British Sugar, at current exchange rates, is the lowest cost producer of sugar in the EU.
POORER RESULTS FOR SUEDZUCKER
Suedzucker is the EU's largest producer. It has been quoted as saying that it expects to make a 2018/19 operating loss between €100 and 200 million. It is not alone : Nordzucker is reported to believe that hardly any European sugar company can operate at break-even.
BMA SAVED BY SMAG
BMA has been in financial trouble for a long time but has struggled on thanks to its people. It now seems that there will be what is being presented as a merger with German material handling company SMAG. The announcement did note, however, that there were a few matters to resolve so let's hope it happens.
SUCCESSFUL PRIVATISATION IN TURKEY
Last month we suggested that Turkey's desire to privatise 14 of Turkseker's less attractive factories would not make for a successful privatisation. It seems, however, that it may work as four of the factories have already been sold with prices ranging from US$68 to $130 million.
MAJOR REFORMS COMING IN ETHIOPIA?
The new Prime Minister of Ethiopia only took office at the start of April but he is already having an impact on the country's sugar development program. Metec, a contractor controlled by the country's army [the generals' pension fund?] has been fired from its role on at least one factory project and the government has said that it wants to bring in foreign contractors to take over. That could well mean the Indians, again, or the Chinese : watch this space!
INDIAN CANE PAYMENT ARREARS REACH $3 BILLION
The squeeze on millers in India is so intense that cane payment arrears are reported to have reached $3 billion and are expected to continue to climb to as high as $3.8 billion [yes, that is US dollars]. The fundamental problem is government interference : it sets a minimum cane purchase price without reference to the selling price of sugar to please the farmers [aka 'voters'].
There is now talk of the government having to pay the farmers direct some of the money due from the mills, perhaps as much as US 84 ¢/ton.
INDIAN AND PAKISTANI SUBSIDIES UNDER THREAT
Brazil, Thailand and Australia are reported to calling for an end to the current export subsidies given by India and Pakistan to their sugar producers. The issue is apparently due to be raised at a meeting this month of the 'Global Alliance for Sugar Trade Reform and Liberalization'.
The Global Alliance members include Australia, Brazil, Canada, Chile, Colombia, Guatemala, South Africa, Thailand and – interestingly – India. The Alliance seems to have a voice at the WTO so this could be a serious threat.
CAMBODIAN FARMERS SUE MITR PHOL IN THAILAND
A group of 3000 Cambodian farmers is apparently suing Mitr Phol in Thailand [not Cambodia] for forcing them off their land during the company's ill-fated venture in Cambodia. As the project hinged on a Cambodian government concession it is difficult to see how any court action will succeed.
BARBADOS CROP FINALLY STARTS
The crop in Barbados should start in January or perhaps early February. This year that didn't happen because the farmers were owed about US$ 9 million from the previous crop. In the end the government paid 60% of the debt so that the farmers agreed 'in the interest of Barbados' to start cutting on April 9. The crop is only likely to produce less than 10 000 tons of sugar, all processed at Portvale factory.
BRAZIL SET TO DRASTICALLY CURTAIL CRYSTAL PRODUCTION
Brazil, with its caneflex factories able to divert production to ethanol or crystal sugar at will, has always been an enigma. The current crop is forecast to be a prime example as the industry responds to the poor current world price. Some analysts are predicting that crystal production could fall from the typical 30 million tons to as little as 22 million. That must be more or less the minimum that the country can go to without abandoning cane in the fields.
SHREE RENUKA TRIES TO SELL BRAZILIAN ASSETS AGAIN
Shree Renuka, essentially now part of Wilmar, has submitted plans to the Brazilian bankruptcy court to sell Revati factory with an option to also sell half of Madhu factory US$4.3. A US private equity fund is said to be interested. Renuka owes the banks $857 million and on two previous occasions the lead bank has blocked sales with court orders. Maybe this time it will be 'third time lucky'.