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Some interesting snippets this month and the Illovo story seems to have come to a head.
EU SUGAR AND WTO
May 22 was the deadline for the EU to comply with the WTO directive on the dispute(s) over its sugar regime brought by Australia, Brazil and Thailand. The WTO therefore reviewed the EU compliance just before the deadline. The official wording of both the EU statement and the WTO report of the meeting are bland but one suspects that a lot of heated debate lies behind the blandness. It is only when you see the number of regulations and related documents required [in twenty languages!] for the EU to implement the reforms that you can appreciate the EU position :
BRITISH SUGAR / ILLOVO
It looks as if the ABF [British Sugar’s owner] purchase of Illovo will go ahead with a ‘recommended offer’ agreed and ABF claiming 64% of the shareholders supporting the deal. Quoting ABF, the principal features are:
Don Macleod was quoted as saying that “ABF’s ZAR21 a share offer had been recommended by Illovo’s board unless it was trumped by a rival offer of more than R23,10 a share”. The question is, is ZAR 21 per share a reasonable price? Before the bids went in the share price was only ZAR 15 – and only then because the world price is currently so high.
In a separate announcement, Illovo stated that it planned to raise annual production by 300 000 tons [from 1.87 million at present] by 2010 at a cost of about ZAR500 million and that it would invest a further ZAR825 million after 2010 to increase output by another 305 000 tons outside of South Africa. In addition, it plans to build new power plants with 150 MW installed capacity, selling one third of the output to various national grids. The first of the stations is expected to be in operation by November 2008.
The world sugar price has eased back to nearer 15 ¢/lb. What is interesting though is that the blame is being put on a weakening of the Brazilian Real which will encourage exports from that country. If you look at the one year chart that is indeed correct : the Real did weaken in May. But if you look at the five year chart you will see that the weakening is insignificant compared to the almost doubling in strength since late 2002. In the same period Brazil’s exports went from about 8 million tons to about 18 million.
The annual USDA report on the world’s sugar industry [as of the end of 2005] was published in late May. Definitely worth reading if you want an overview of the commercial aspects of the industry.
MEXICO v USA
Regular readers will know that Mexico imposed a 20% tax on US HFCS in retaliation for its failure to allow free access to Mexican sugar under NAFTA. In March WTO upheld a complaint by the US and it now looks as if Mexico is willing to remove the tax, at least at the top level : President Fox has issued a decree to that effect but it must now go to Parliament. However, the whole thing is rather like the War of Don Emmanuel's Nether Parts [the first book of Louis de Bernières and a ‘must read’] as Mexico will have free access to the US for its sugar from 2008.
Western Sugar, now a beet sugar cooperative but previously a division of Tate & Lyle, is anticipating a crop 20% larger than last year’s as the industry responds to the shortfalls following the 2005 hurricanes. It is also anticipating another celebration : this year will see the final capital pay-back for farmers who invested in the company when it was sold by T&L.
LACASSINE OWNERSHIP CHANGE
Lacassine, the new and almost commissioned syrup factory in Louisiana is, apparently, to be transferred from State ownership to the local cooperative. Whether that actually happens is another matter as Agricultural Commissioning has reportedly decided to subordinate $10 million of the cost to help the farmers raise the necessary loan – without the full approval of the State.
The government is again embarking on a privatisation process for the Sugar Company of Jamaica, calling for pre-qualifications in advance of a formal tendering process. How many companies will actually tender is open to debate however : the company lost US$ 18 million last year and has accumulated debt of US$ 116 million.
BELIZE : LIBERTAD TO OPEN AGAIN?
BSI used to operate two factories : the old Libertad factory in Corozal [which dated from the 1930’s] and the more modern Tower Hill factory. Libertad, right up near the Mexican border at Chetumal, was shut in 1985 and subsequently leased by Petrojam to make thick juice for its Bernard Lodge distillery – a failure. A Texan company - Blue Diamond Ventures (!) - is now wanting to operate Libertad as a power ethanol distillery : watch this space!
SOUTH AFRICA ETHANOL
Perhaps fuelled by an enthusiastic group of Free State maize farmers with a good PR company, the government seems to be moving towards a 10% ethanol blend. At the moment the country imports 60% of its fuel requirement, the rest coming from Sasol [which makes liquid fuels from coal and leads the world in that technology] and a small off-shore gas field. SASA exports about 1.2 million tons of raws per year but diverting all that to ethanol would not achieve 10% blending, hence the need for maize as well.
In the end, only four companies tendered for the privatisation of Kinyara Sugar Works : Madhvani [the owners of Kinyara’s main competitor Kakira], TSB/BT [the current managers of Kinyara], Olam International and Rail Holdings. Olam is a publicly quoted agro-industrial group out of Singapore and Rail is understood to be a privately owned company from Kenya with interests in wood processing. Illovo, Deep River Beauchamp and The Libyan Investment company did not bid. The prices of those tenderers submitting acceptable technical proposals will be announced on June 15.
Meanwhile, Kakira is about to complete its 20 MW export co-generation project – but the government’s grid is refusing to sign the PPA despite the fact that Uganda has a peak hour deficit reported to be as high 165 MW. 12 MW of Kakira’s power would be available for export.
ANOTHER MYSTERY INVESTOR FROM RSA
Another major sugar project backed by [unnamed] South African investors and technical partners has been announced : this time in Cameroon. The company is seeking to secure 30 000 ha of land [14 800 core estate, the rest for outgrowers] and expects to produce at least 60 000 t/a of sugar increasing to 360 000 tons. Although Cameroon is theoretically bilingual, it is essentially a Francophile country so don’t expect the French to take the possibility lying down – if indeed the project is for real.
ANOTHER INDIAN REFINERY
Renuka sugars has announced that it is being a 2,000 t/d refinery at the port of Haldia in West Bengal. Apparently it has entered into an agreement with Copersucar for both technology and the supply of the raw sugar : another example of the fox running with the hounds?
Guysuco is thinking about a 360,000 ℓ/d ethanol plant – but from new cane planting, not diverting sucrose to ethanol. It is unclear how it hopes to make the project economic when the current cost of sugar production is ~18 US¢/lb, implying a cost of sucrose in cane of perhaps 12 US¢/lb delivered to the factory gate.
There seems to be a foreign company behind the project : Tanacama Ltd, said to be an Israeli/Spanish company. The plan of that company appears to involve drip irrigation cane cultivation but as most of Guysuco’s cane land has drainage issues rather than irrigation ones that does not seem logical.
A wonderfully contradictory article about the situation in Iran hit the wires in May. [Any article stating that “Cuba is a major global supplier of the strategic product.” needs to be taken with care.] The central planning organisation was quoted as saying that half of the current 1.9 million ton demand has to be met from imports – figures that differ from the international view of 37.5% of a 2.4 million demand. However, the same article also quoted the organisation as saying that it was going to increase production by 150 to 200 000 tons and therefore imports would not be required.
Following last month’s item about Taisuco, the company was in the news again as it announced a proposed increase in cane planting – an additional 7,500 ha was mentioned – in order to buffer the country against the current high world price. That is totally contrary to the policy of the last ten or fifteen years when cane production was deliberately cut back in favour of rice and the new refinery was built in Kaohsiung.
DOUBTS CAST ON POLICOSANOL
As we have reported in the past, policosanol is an extract of sugar cane wax which is reported to have cholesterol reducing properties in humans. However, a study published at the end of May by a German research group has reported no apparent activity in a 12 week controlled experiment.