Sugar Technology
On-line News

June 2005

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The news continued to be dominated by the WTO ruling on the EU's sugar regime and the proposed Central American Free Trade Agreement. Nonetheless there were some other interesting snippets.



The EU has announced its proposed reforms of the sugar regime. The highlights are below, a fuller story and analysis will be published as usual early in July :

  • A 39 percent price cut over two years beginning in 2006/07 to ensure sustainable market balance.
  • Compensation to farmers at 60% of the price cut. Inclusion of this aid in the Single Farm Payment and linking of payments to respect of environmental and land management standards.
  • Validity of the new regime, including extension of the sugar quota system, until 2014/15. No review clause.
  • Merging of ‘A’ and ‘B’ quota into a single production quota.
  • Abolition of the intervention system and the replacement of the intervention price by a reference price.
  • Introduction of a private storage system as a safety net in case the market price falls below the reference price.
  • Voluntary restructuring scheme lasting 4 years for EU sugar factories, and isoglucose and inulin syrup producers, consisting of a high degressive payment to encourage factory closure and the renunciation of quota as well as to cope with the social and environmental impact of the restructuring process.
  • This payment will be 730 euros per tonne in year one, falling to 625 in year two, 520 in year three and 420 in the final year.
  • A top-up payment for beet producers affected by the closure of factories in the first year for which they have delivery rights.
  • Both these payments will be financed by a degressive levy on holders of quota, lasting three years.
  • Sugar beet should qualify for set-aside payments when grown as a non-food crop and also be eligible for the energy crop aid of 45 euros/hectare.
  • To maintain a certain production in the current “C” sugar producing countries, an additional amount of 1million tonnes will be made available against a one-off payment corresponding to the amount of restructuring aid per tonne in the first year.
  • Sugar for the chemical and pharmaceutical industries and for the production of bio-ethanol will be excluded from production quotas.
  • Increase of Isoglucose guota of 300.000 tonnes for the existing producer companies phased in over three years with an increase of 100.000 tonnes each year.


Despite its recent balanced view, the International Sugar Organisation is now predicting a 2 million ton shortfall for the current year : 147.1 million tons of consumption and 145.1 million of supply. It does not foresee that this will result in major price rises though, the deficit being covered by sugar from stock. The sugar price continues to hover just below 9 US˘/lb.


Mariann Fischer Boel, the EU’s Agriculture Commissioner has announced that she wants agreement on reform of the sugar regime before the Hong Kong WTO meeting in mid December this year : “I'll put the legal proposal in front of you on June 22 with a view to have a discussion in the council (of ministers) in July and if possible a political agreement in November".

What Mrs Boel didn’t say but was subsequently leaked is that the EU is now contemplating a 39% cut in the sugar price within the union, compared to the 32 or 33% cut raised a year ago. It now appears that the EU has suspected a source of a persistent leak of its sugar pricing proposals within its Brussels offices for some time : each commissioner was given a slightly different version of the leaked document. Real spy story material.

The European Commission, administrative arm of the European Union, has been trying to catch the source of a persistent leak of its sugar pricing proposals.


Meanwhile, the Caribbean members of the ACP group of countries are threatening to take the EU to the UN’s International Court of Justice if it reforms its sugar regime as required by the WTO. If the Court finds in their favour then perhaps the EU can stand back and allow the two international organisations fight it out.


The debate in the US over the proposed Central American Free Trade Agreement, reported last month, continued throughout May too. That brought it to a full year since the accord was agreed in principle and some people calling for a vote or an overhaul of the whole policy. Sugar is, of course, one of the issues holding up the approval so it was surprising to see Australia’s outgoing ambassador to Washington stating that he still expected to see sugar added to the Australian trade agreement with the US.


The Eastern Cape Beet project in South Africa is not as dead as some thought. A new feasibility study is apparently due for completion in July but it hard to see how it can turn round a project which has been off and on for many years now and couldn’t raise the promise of sufficient beets each year to make it viable.


Thailand is warning of a drought-hit crop with a 10% shortfall in cane production at 43 million tons. However, last year was substantially down on the peak of 64 million tons, also due to drought. The problem seems to be mainly in the north east of the country where output is predicted to be 22% below last year.

The country’s sugar exports in the first quarter of this year were 32% down on the exports for the same quarter of 2004.


Following on from last month’s news item on Trinidad’s poor crop, the newly formed Sugar Manufacturing Company Limited [Caroni as was] has confirmed that it only made 33,100 tons of sugar and will not be able to meet its EU quota. It took 532 000 tons of cane to make the sugar and that was nearly 200 000 tons short of budget.


The US’s Imperial Sugar looks as if it might be purchased by one of its shareholders, Schultze Asset Management. What is not clear is why Schultze would want to buy the much diminished company and what it would do with it.


Cargill seems to be investing in vertical integration with the purchase of part ownership of Acucareira Corona which owns the Bonfim and Tamoio mills. The investment is in joint venture with Crystalsev [Cargill’s partner in the Guaruja sugar export terminal] and Fluxo, another sugar trader.


Following the State’s announcement in January, there was a ground breaking ceremony for an ethanol plant at Lacassine in the middle of May. However, it looks as if the developer may have been press-ganged : its CEO was quoted as saying that this was a ‘preliminary’ groundbreaking and he admitted that he has not yet purchased a license for the technology intended to be used.

The plant will hydrolyse bagasse from the Lacassine mill and other cellulosic material to make the ethanol although the possibility of also using sucrose as a feedstock was mentioned. The scale of the development is also unclear with the full scale plant said to be designed for 140 million to 160 million gallons per annum but the initial development being a ‘pilot plant’.


The New South Wales Sugar Milling Co-operative has signed contracts with Downer and its subsidiary Clyde-Babcock Hitachi for two export co-generation stations, one for Condong and one for Broadwater. The stations are to be built simultaneously for commissioning in mid 2007.


It looks as if at least the White Nile Sugar project is to go ahead : the government has approved a $71 million loan from the Arab Fund for Economic and Social Development for the project. The project, with a total cost of over $400 million has been rumoured for a long time. The plan is to produce 340 000 tons of sugar each year. What is not clear is whether it will be a totally public sector enterprise or a private sector one like Kenana.


Are we seeing the opening scenes of Florida’s next mill closure? Permanent workers at the Atlantic Sugar factory have been laid off and the rumours in the sugar belt are that the factory will be closed for good.

Talisman sugar was closed quite a few years ago and US Sugar recently announced the closure of its Bryant mill in 2007 when the expansion of its Clewiston mill will be complete. Atlantic is controlled [but not fully owned by] Florida Crystals which also owns the neighbouring Okeelanta mill and the northern Oceola mill. If it is to close one of the three units then Atlantic must be most susceptible. If it does happen then Florida will be left with just four mills, down from seven in the late 1990’s.


China is expecting sugar consumption to grow as domestic production shrinks, resulting in a doubling of imports to about 2 million tons per annum by 2008.


Triveni Engineering, one of the better known sugar production groups in India has announced that it is to build three new sugar factories in the western sugar belt of Uttar Pradesh. The factories are to be completed by 2007 but will start with low capacities and build from there as the new units induced the growing of more sugar cane.


The Government of Cuba is predicting a harvest of only 1.3 million tons compared to a budget of 2.5 million tons and 200 000 tons less than the estimate last month. However, the government seems to have abandoned the idea of a flourishing industry : Fidel Castro is reported as saying that the sugar industry belongs to the slave era! Different words than spoken just 3 years ago when half the factories were closed to streamline the industry and still achieve 3.6 million tons but a useful face saver perhaps.


Low Glycemic foods seem to be the latest fad and are, of course, very important to people who suffer from diabetes. However, we are at a loss as to how the Mossman mill in Queensland can come up with sugar with a ‘low glycemic’ index. No details of the discovery were revealed in the press however, so we will have to wait and see.

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