Sugar Industry News : June 2017
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Last month we reported that the consensus was that the price had further to fall from the April ending in the mid 16s ¢/lb. That turned out to be really true but the graph only tells part of the story :
Beyond mid-month the price was still in the mid 16s, it was only in the last 7 days of the month that it collapsed so dramatically, losing over two cents. Are we on the way back to the Brazilian real lagging the sugar price [as was the case until mid 2015] and, if so, whereabouts on the graph?
USDA EXPECTS NO INCREASE IN CONSUMPTION
The biannual USDA world report on sugar, with first predictions for 2017/18, was released last month. It shows, perhaps for the first time ever since records were kept, a predicted flat line consumption graph instead of the more or less steady 2% increase we have come to expect. At the same time, production is predicted to be up 9 million tons in 2017/18, mainly due to the premier league : Brazil [+0.5 Mt], China [+1 Mt], the European Union [+2.1 Mt], India [+3.9 Mt], and Thailand [+1.2 Mt].
POSSIBLE TAKEOVER OF BUNGE
In mid-May Glencore, an Anglo–Swiss multinational commodity company with a strong emphasis on mining, hinted that it would like to form 'a possible consensual business combination' with Bunge, Bunge's share price jumped about 10% on the news. . Bunge rebuffed the suggestion but analysts seem to think that something will happen : watch this space.
Bunge is basically a agro-industrial company. Although it only decided to enter the sugar sector some 10 years ago it has grown quickly to become a major trader and an origin too, having taken over two producer groups in Brazil. Agro-industry at Glencore, on the other hand, is a relatively minor part of the mix and it is less than a year since it sold off half of its agricultural division.
WEATHER EVENTS THREATEN EUROPEAN BEET CROP
It was being reported in early May that a late frost may have damaged the newly emergent beet seedlings in Eastern France, Germany and Poland. That comes on top of two very dry months in the relvant parts of France, Germany and the UK.
DANGOTE REAFFIRMS BACKWARD INTEGRATION GOAL
Aliko Dangote repeated his backward integration assertions at last month's AGM of his group, this time naming the projects that will proceed. He said that the group will spend US$ 327 million on refurbishing Savannah plus greenfield projects in Nassarawa and Taraba States. The stated objective is to produce 1.5 million tons of refined sugar from local cane in the next six years.
PRODUCTION PLUMMETS IN UGANDA
The Uganda Sugarcane Manufacturers Association is reporting that 2016 production was just ~ 331 000 tons, less than 80% of the 420 000 tons produced in 2015. It is blaming the fall on drought conditions.
ERROL JOHNSTON STANDING DOWN AT MUMIAS
Errol Johnston has decided not to renew his contract as CEO of Mumias. It will lapse in August. The company is expecting that its loss for the year shortly ending will be 25% worse than the US$45 million loss in the previous year. We will have to wait another six months to find out the truth.
SOUTHERN AFRICAN DROUGHT ENDING
If Tongaat Hulett's crop forecast is anything to go by, the drought in Southern Africa is easing as the impact of the last El Niño event fades. Tongaat issued an optimistic trading statement in may which included a predicted 1.5 million tons of sugar production across all of its facilities, up from a nominal million tons for each of the previous two years.
CHINA INCREASES TARIFFS
China has announced that it will almost double its duty on sugar imports [from 50% to 95%] in an attempt to protect its own industry. It is also expected to crack down on the illegal imports which mainly seem to flow through Burma across what is described as a very porous border.
WILMAR RESOLUTION AT LAST
The chaos caused by Wilmar's announcement – was it back in 2014? – that it would sell its sugar on a direct basis and not through QSL seems to be over. It is reported that an agreement has been reached whereby every grower will be able to nominate which of the two parties will sell the sugar from his cane. It will be interesting to watch the tactics of the two as each seeks to sign growers.
MEXICO / US WAR
Last month we suggested that the US had blinked first in the fight over the NAFTA sugar regime. Perhaps we spoke to soon : in early May the US announced that talks were at an impasse and that it would terminate the existing agreement if a new one had not been reached by June 5. In that event it would reintroduce anti-dumping and anti-subsidy duties. Watch this space!
RADICAL CHANGES PROPOSED FOR GUYSUCO
A government white paper in Guyana is proposing to reduce Guysuco to three estates and to sell off Skeldon [because it cannot afford the investment needed to refurbish!]. Essentially Enmore, ECD and Rose Hall would stop production [ECD is said to be earmarked for 'diversification'] to leave Blairmont estate, Albion-Rose estate and Uitvlugt-Wales estate. The stated objective is for Guysuco to produce 174,000 t/a.
BOSCH ACQUIRES BOOKER TATE
Bosch Projects, the South African engineering company, has purchased Booker Tate from what was TSB, the third of the country's sugar groups, part of the Rupert family empire and now rebranded as RCL Foods. Booker Tate will bring a lot of operational management experience, something which Bosch has only had limited experience with to date.