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July 2011

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Ongoing stories continue ...


At the end of May the world price had just bounced off a low of about 21 ¢/lb with the expectation that it would climb further. In practice, just one month later it stood at over 27 ¢/lb – a 30% increase in just 6 weeks :

World Price

There is no sign of it stalling either.


Reports are talking up next year’s land area under cane in India. In 2010/11 the area under cane was reportedly 2.1 million ha with millers typically paying R 200 per quintal [$45 per ton] despite the official price being R139. The farmers are said to be planting more cane – the official estimate is an additional 200 000 ha – on the expectation of cane payments perhaps being R 220 to 230 per quintal. However, at $50 per ton and 12 tcts that is $600 per ton sugar or 27 ¢/lb before processing ….


It is interesting to compare the prices being paid to Indian growers, as discussed above, with British Sugar’s new beet contract price of £27.53 per ton : $44 per ton but for a much higher sucrose content. With a tbts of say 6.666 that equates to $294 per ton sugar or 13.36 ¢/lb before processing.


Data for China’s 2009/10 crop is now available : output was down by 14% year on year due to the drought experienced in 2009. Consumption is recorded as 13.8 million tons for the period and production was only 10.7 million tons although there were only 1.8 million tons of imports.


The general view seems to be that Cofco, the Chinese company, will win the race to take over Tully mill in northern Queensland. Fairly early on last month the Chinese increased their offer to Aus$ 44 per share, placing them $2 ahead of Bunge and $3 ahead of Mackay which has not moved from its original offer of $41. Towards the end of June Cofco reported that it held over 26% of the shares in Tully with a lot more promised after the end of the current tax year [which is June 30] and Bunge had not increased its offer to match Cofco.

In one interesting move Cofco has offered a board seat to the chairman of a major cotton grower called Cubbie which is some 1200 km south of Tully [but still just in Qieensland]. It is reported that the administrators of Cubbie have been trying to sell the company, the largest irrigation property in the southern hemisphere, in China so maybe there is a connection but otherwise why make such a remote appointment?


With its offer for Tully not looking like a winner, Mackay Sugar is trying its best to stay in the running for Proserpine even though, as reported last month, the Proserpine board agreed the sale of the company to Wilmar-owned Sucrogen for Aus$115 million. It is playing a strong xenophobia hand but is only allowed to talk to shareholders as it is locked out of access to the accounts because of the agreement with Sucrogen. The Proserpine board has reacted by telling Mackay not to mislead its shareholders.


Maryborough Sugar has announced that its newly acquired factories in the far north of Queensland [South Johnstone and Tablelands – it closed Babinda almost as soon as it had purchased it] will also withdraw from selling sugar through QSL when the current contract runs out in 2014.


Amalgamated Sugar, the Idaho based beet sugar cooperative and Sucden Americas, the Miami based arm of France’s trader Sucden, are forming a joint venture to market sugar produced by Amalgamated and imported by Sucden.


Following on from last winter’s big freeze, it seems that a severe drought is affecting Florida’s cane lands. The problem is made worse by the decision by the US Army Corps of Engineers to limit the height of water in Lake Okeechobee because it is worried by the integrity of the lake’s dyke.


Tower Hill has finished its crop having managed to crush all available cane despite the problems with the new turbines earlier in the season. It delivered an impressive 8.5 tcts with only 3.4% molasses on cane but unfortunately the cane was just not grown so fell some 10% short of its production budget.


Cuba has apparently doubled the price to be paid for sugarcane in the hope of encouraging growers to grow more. It wants to double cane production within 5 years but of course that requires more fertiliser, more tractors ……


Jamaica’s Sugar Industry Authority is sounding very positive about the current which will end during July. Part of that is because last year was so poor and only 118 000 tons of sugar were produced. However, there are also seem to be some positive signs with the private and newly privatised mills doing well and hopes for the about to be privatised large factories. This year’s production seems to be about 135 000 but as production less than 10 years ago was 180 000 it is still not good. We shall see.


What goes around, comes around so the government of Barbados has announced a $100 million project to diversify what is left of its sugar industry [ISO reports a decline from 45 000 tons in 2002 to 30 000 in 2009] into ‘bagasse, ethanol, special sugars and molasses’.


The government of Brazil has announced that it will set aside $22 billion for the expansion of that country’s sugarcane industry over the next three years. This is the same Brazil which took the EU to the WTO for subsidising the European sugarbeet industry.


Cargill has invested an undisclosed amount to buy 50% of a company which owns a mill called Sao Francisco and is building a second mill called Cachoeira Dourada. When both are operational the crush will be 7.5 million tons per annum.


We told you in the March news that Shell and Cosan were forming Raizen, a new company to emerge from the effective take-over of Cosan by Shell last year. Last month the company started operations so a press release gave some statistics. The company’s annual crush is 62 million tons which will presumably be split roughly 50/50 between crystal and ethanol so maybe 2.3 billion litres per year. It gets, on average, 7000 litres of ethanol per hectare per annum. However, the US consumes 1.4 billion litres of gasoline per day. You do the maths.


The Ethiopian government is certainly ambitious : it has announced the start of the Omo Kuraz Sugar Factories project which is scheduled to have six estates in the south west of the country operational by 2016. What is interesting is that there is no mention of Indian finance and all the work is to be undertaken by a local contractor. It seems that each factory is to produce 200 000 tons of sugar annually. Watch this space!


Kenya has finally published a law which allows private investors to take up to 51% of the government owned mills in the long delayed privatisation process but one suspects that privatisation is still a long way off. The government is claiming that is has had expressions of interest from Brazil, Mauritius and Turkey.


Uganda is predicting a 20% increase in production this year, primarily due to a major expansion at Kinyara but also as a result of modest increases at Kakira and Scoul. The 2010 crop was 297 000 tons of sugar and the forecast for this year is 350 000, something which seems quite achievable judging by performance to date.


No : not a strike breaker but a crop killer : blackleg seems to be a problem in the English beet crop in 2011, a fungal infection which kills off beet seedlings. Brooms Barn, the beet research centre, reports that although there is no economic treatment it tends to be localised and mainly in late sown crops.

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