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July was all about Politics : first of all the long awaited EU reform of the sugar industry and then the ‘historic’ WTO agreement. The sugar price continued to strengthen too at nearly 8.3 ¢/lb at the month end.
WTO RULES ON EU SUGAR REGIME
The WTO hearing on the EU sugar regime, brought about by a complaint by Brazil, Australia and Thailand, has ruled against the EU. The reaction from the complainants was jubilant and the EU refused to comment. Perhaps one of the most interesting comments came from the US where the American Sugar Alliance accused Brazil of illegally subsidising the sugar industry, not directly but via “three decades of support for ethanol”.
EU SUGAR REGIME
Thank goodness that Franz Fischler, the EU Agriculture Commissioner, finally announced his plans for the reform of the EU sugar regime : the wires were totally clogged in the first half of the month with speculation on the contents [and then comment on a ‘leaked’ version] of the document. Not that it did much good : the second half of the month was full of comment on the plans and complaints from all sides.
The key components of the proposals, scheduled to start next July, are to reduce the internal price of sugar in steps over three years [the minimum price for sugar beet would be reduced by 37%], reduce annual quotas by 2.8 million tons [16%] over four years, offer compensation for leaving sugar production and eliminate public intervention. The ACP quotas would remain [albeit at a much reduced price], as would the EBA initiative for the LDC’s. The quota reduction would reduce exports by 2 million tons but a small [400 000 t/a] export would remain. Interestingly, countries would be able to trade quota under the new scheme.
Negative comments came from many quarters, particularly those most affected [including EU governments which would lose valuable farmer votes if the proposals are adopted]. Somewhat strangely, organisations like OXFAM – a strong opponent of the old regime – were also critical. However, the big question, of course, is whether the proposals will be accepted : only time will tell but it should be interesting watching the debate. The first meeting of EU Agricultural Ministers, held almost immediately after the announcement, certainly failed to agree on the proposals. However, it was reported that they agreed that reform was needed so the first steps have been taken.
At the end of the month the WTO reached what was called an ‘historic’ agreement to cut agricultural subsidies and import tariffs around the world. The deal came after some very late nights for Ministers of the 147 countries which are members of the organisation but it only paves the way for more discussions later in the year, being described as a ‘basis for talks’. The text of the WTO announcement is available on line.
The main points include rich countries agreeing to eliminate all forms of export farm subsidies [although they can keep some of their domestic support], an immediate 20 per cent cut [as a starting point] in the maximum permitted payments by those rich nations and poorer countries agreeing to cut import barriers and make customs procedures easier and less expensive.
What then is the snag? The EU sugar regime is still outside the negotiations.
The EU, satisfied that Serbia has put in place better controls to demonstrate that exported sugar is indeed Serbian, will left its current sugar import ban early in August. The original ban, which was for 6 months, was twice extended so that the overall time period was 15 months. Another news story in July reported that it was now Bosnia which was being investigated by the EU Customs for passing through 100 000 tons of sugar.
In a not quite so related but nonetheless interesting move, the Indian government seems to have the reverse problem. It has asked the EU to reject what it calls an unauthorised shipment of 10 000 tons of sugar sent to Germany as [Part of?] India’s EU quota.
India’s latest crop forecast for the current year [which ends at the end of September] is 13.8 million tons. The country has a total of 564 factories but 144 of those are closed and many of the others are small and inefficient units.
MUMIAS EXPORT COGENERATION
It may be that the problem with Mumias’ proposed export of electrical power has been identified : the government is only offering about US 1.7 ¢ per kWh. The company is saying that it would need about 6 ¢ per kWh to make the investment worthwhile.
NEW REFINERY FOR EGYPT
Savola, the main shareholder of the Jeddah refinery, has finally announced its plans to be build a 600 000 t/a refinery in Egypt. The refinery, budgeted to cost US$ 92 million, will be located in Suez, to the south of the canal and therefore strategically placed to import raws from Australia, South Africa and Thailand. The capital cost estimate is in stark contrast to the almost $150 million that Jeddah cost, a 500 000 t/a refinery with in-built capacity increase to 700 000.
COSUMAR, the state sugar company of Morocco has announced plans to expand one of its beet factories in order to close another. The project, reported at US$ 89, is aimed at increasing slice from 12 000 to 16 000 TBD.
The latest USDA supply and demand figures for sugar show minor downward forecasts for production in the current year [which ends at the end of September] but this more than compensated by forecast increases in imports so the year is still predicted to end with stocks higher than last year by 500 000 tons. What is of more interest is the year on year forecast with next year. This year’s stock increase is forecast to be wiped out, mainly by a reduction in domestic production. The beet sector is forecast to fall by 367 000 tons : about 9% of this year’s production.
Sugar is about 48% of the US’s total sweetener consumption.
The Iranian government has announced that it will not be importing sugar this year although demand, at 1.9 million tons, is forecast to outstrip local production by 500 000 tons. As it would have to rely on a strategic reserve of only 600 000 tons, this seems to be a very short term approach.
The small sugar factory built by the Indians over the last two years not that far from Nakambala has started its first full crop. The company is selling its product domestically as Kafue Sugar but there was something wrong with the statistics issued : expected production of 45 tons this year [45 000 or 45 per day?] from 8 000 ha of cane.