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The world price is back to the front of the queue ....
Well, it might have taken two years but we are back where we started : by the end of May the raws price was back down to 9 ¢/lb and looking to go even lower :
ISO’s current view is that the surplus will be at least 9 million tons this year, largely as a result of strong crops in Brazil and India.
In India itself things are not particularly rosy, as we reported in April. Factories have been shutting early, leaving farmers with cane in the fields on the basis that the farmers can send the cane elsewhere or ‘because there has been too much rain’. Another reason being put forward for shutting is the poor rendement which is reported to have dropped from about 10 to over 13 tcts.
In the final analysis though, the industry has created a major surplus [it is expected to have stocks of 12 million tons of sugar at the end of this year] which has reduced the selling price to sub-economic. One estimate is that famrers are owed a staggering US$1.3 billion for their cane. The industry body, ISMA, is asking the government for support.
The Brazilian industry is also suffering so the government there is contemplating increasing the obligatory bio-ethanol component of all gasoline sold from 23 to 25%. This is the mechanism currently used to support the industry : each one percent by which the mix is changed equates to about 250 million litres per annum of bio-ethanol.
A recent report estimated that the centre-south region [about 85% of Brazil’s total production is there] will crush 415 million tons of cane this recently started crop year, substantially up from the 371 million crushed in 2006/7. Just over half is expected to be used for ethanol production.
We have said here in the past that the Sudan has the potential to become another Brazil and now the government has recognized that too : it is planning to produce 10 million tons by 2015 from 13 new projects. That is a nearly 1200% increase on the current production. The new projects are expected to create 700 000 new jobs.
ETHIOPIA : PRIVATE INVESTMENT
It seems that Ethiopia may be getting its first private investment in the sugar industry : a 29 000 ha land block has been allocated to a Pakistani investor in Oromia State about 250 km south west of Addis. It is reported that he intends to invest US$ 850 million. That is coming up towards 1% of Pakistan’s GDP [and over 6% of Ethiopia’s] and he needs to make a lot of sugar if he wants a return on his investment ...
Following our reports of the last two months, the directors of Mulgrave have written to the farmer/shareholders recommending that they reject the Maryborough proposal to take over the business. That still leaves Bundaberg as a possible buyer but it is no longer a race [unless Maryborough decides to fight].
The future looks bleak in the Ord River Valley where commercial sugar production looks to be sub-economic. In the middle of May, the Korean owners of the only sugar factory there decided to close the facility as there was just not enough cane to process unless the irrigation scheme was substantially increased. At the end of the month it was announced that the local farmers were asking jilted Maryborough Sugar to take over the factory.
Tereos [Begin Say as was] seems to have absorbed another beet factory in northern France : Marconelle which is just 65 km from Calais. Perhaps more interestingly, it is also reported to be the likely buyer of Tate and Lyle’s European starch division [Amylum as was].
GOODBYE CARONI …
The crop has finished in Trinidad – for ever. The industry on the island has been steadily declining for a long time, faced with high costs and really only supported by the quota market. Now that the EU is cutting back the price that is paid the end of the company was inevitable.
… AND ST JAMES
As expected from our report last month, the St James sugar factory has indeed closed down for good. That brings the factory count down to 12 [we think] and so well on the way to the predicted 7 or so that might survive.
TROPICAL BEET TO ETHANOL
A sugar cane co-op in Maharashtra is about to start harvesting 600 ha of beet fields for use as feedstock in ethanol production : watch this space!
EU TIGHTENS THE NOOSE
At the beginning of May the EU announced new measures to ‘encourage’ people to bail out of sugar production following a poor take-up of its previous scheme. The objective is to reduce production by 6 million tons but, although 1.5 million tons was given up in the first year only some 0.7 million was given up in the second year and the scheme was early-year biased so there are unlikely to be many takers from now on. The new scheme seems to be aimed directly at beet growers and is accompanied by a threat that if the objective is not achieved by 2010 then the EU will forcibly reduce quotas. The full press announcement is available on the internet.
EU OPENS UP TO ACP
Many of the ACP countries are LDC’s and hence participants in the EU’s ‘Everything But Arms’ programme but now the EU has effectively let all ACP countries join the programme. As with the EBA there is a phasing in for sugar : no real change until October 2009 when non-LDC members of the ACP also get duty free access but subject to an automatic volume safeguard; after October 2015 the safeguard is reduced but not eliminated.
PAKISTAN GOES WITH THICK SYRUP
The Sugarcane Grower's Association of Pakistan has announced plans to construct 500 TCD satellite mills producing thick syrup and surplus electricity as a means of cutting back the cut to crush time of its cane. What is not clear is where the money is coming from for these units and whether the millers will cooperate in processing the syrup produced.
INDONESIA TO ‘REVITALISE’ ITS INDUSTRY
The Indonesian government has announced plans to spend US$ 5 billion on modernising its sugar factories. It was interesting to note that there was no mention of shutting down factories on Java to encourage people to move to other islands so perhaps the government has finally abandoned that policy.
DEDINI : COMMERCIAL CELLULOSE HYDROLYSIS
Dedini, the large Brazilian equipment supplier [and mill owner] is claiming that it can produce bio ethanol from the hydrolysis of bagasse for “about 40 ¢/ℓ”. What is not clear is whether the costing includes the value of the bagasse or just treats it as having nil value. The technology seems to involve breaking down the lignin content of the fibres under acidic conditions.
FIDEL COMES CLEAN
President Fidel Castro has personally confirmed that the Cuban industry makes a loss, even after the major reforms of the last few years. It was admitted – what a turnabout – that the country is negotiating to buy in sugar from the USA.