Sugar Technology
On-line News

August 2005

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Most of the news in July was still dominated by the reverberations of the EU announcement on reform of its sugar regime - until Congress passed DR-CAFTA in the USA.


STOP PRESS

ASR/DOMINO BUYS C+H

American Sugar Refining, the ex T+L group that still owns the 'Domino' brand and is now owned by Florida Crystals and the Belleglade Co-op, has purchased C+H. With the Crocket [near San Francisco] refinery ASR will have a combined annual capacity of about 3 million tons but, more importantly, it will also gain the C+H brand which is very strong on the US west coast where Domino is weak.

DR-CAFTA

DR-CAFTA is the proposed Central America Free Trade Agreement which was reached back in December 2003, subject to ratification by all participants [see our news pages for January and February 2004]. The Dominican Republic became a party later and hence the 'DR' in the mnemonic.

As we reported last month, the US Senate passed the CAFTA laws by 54-45 on June 30. The House of Representatives did so on July 27 but by a margin of only 2. As President Bush is a proponent of the agreement he is expected to sign so that it passes into law. One presumes that all the other participating countries have ratified it long ago as they would expect to benefit substantially from the free trade.

The sugar lobby has stood firm - and alone - against the agreement from the beginning and it is not clear what support will be offered now that the law is essentially passed. What makes things even worse is that just as the agreement was approved the government started trade talks with Thailand and sugar was not excluded from the agenda.

MEXICO

Mexico is already party to another US trade agreement - NAFTA - but its sugar is the source of a bitter dispute between it and the US - at least until 2008 when the US will have to allow free access to Mexican sugar. The Mexican Congress has passed, by a substantial majority, a bill to continue support for the sugar industry but the President is threatening to veto it despite popular support and a large protest by cane growers last month.

Last month also saw the start of the governments second sell-off of its sugar factories. Regular readers will remember that in 2001 it had to re-nationalise 27 of the factories it had privatised not that long before. It has now said that the first four of those were scheduled for sale last month and another seven were scheduled for sale this month. It was not clear at the time of posting this news who was buying them up.

EU SUGAR

July saw the proposed reforms of the EU's sugar regime enter the political agenda for the first time when they were discussed at a council of agricultural ministers. Before the meeting, Agriculture and Rural Development Commissioner Mariann Fischer Boel admitted that it would be a battle to get the reforms agreed. After the meeting she came across as quietly optimistic.

We have placed the official report of the discussion on sugar here on the domain. The wording seems more optimistic than the unofficial comments coming out of the meeting. Before the meeting there was a minority grouping of eight countries against the proposals but afterwards it was said that this had increased to ten. Whether that is significant depends on which countries are involved as the EU operates a qualified majority voting system proportional to the size of each country's population.

Meanwhile, ED+F Man came out with an analysis of EU sugar exports following the WTO findings and the implementation of the proposed reforms. It thinks that exports in the 2005/6 sugar year may exceed this year's expected 5.8 million tons but then plunge in the following year to below 1.3 million tons. Such a fall would certainly be much more rapid than anticipated by the EU itself.

HAWAII

Perhaps as part of the reaction to DR-CAFTA, Hawaii has voted to support fuel ethanol projects in the state using federal funding and to mandate ethanol in gasoline from next April. The wording of the reports on the wire don't make it clear whether this is for 10% ethanol in all gasoline or an unspecified amount of ethanol in 10% of all gasoline.

FIJI

Fiji has signed an agreement with India for support for its sugar industry, buying US$86 million of equipment to refurbish its factories through a low cost loan arrangement. Part of the plan includes selling firm power [all year round] to the national grid so, if nothing else, the country will rely on the industry so much that it will have to keep it going as has happened in Reunion.

Somewhat mimicking Hawaii, the Government has also announced that is going to investigate establishing an ethanol industry, partly in response to the proposed changes to the EU sugar regime. It hopes that such a move would result in a $1 billion industry by 2025.

WORLD PRICE

The world price almost broke through the 10 /lb psychological barrier during the month. It seems that as the oil price continues to remain high [or continues to climb?] the market is expecting Brazil to divert more sugar to ethanol and hence reduce the amount of sugar available for export. It diverts about 50% of its sugar to ethanol in a typical year.

SPLENDA ADVERTISING

There seems to be a coordinated attack around the world on advertising for Splenda. In general the sugar industry is objecting to claims that the high intensity sweetener is "made from sugar" - which it is, albeit with some major chemical modification - and "tastes like sugar" - which it does. In the first case to reach a conclusion, the New Zealand Advertising Standards Authority has found the advertising to "give rise to a likelihood of a consumer being confused and misled as a result of the comparison in the advertisement".

MUMIAS

Mumias has started to sell electricity to the national grid but the export capacity is limited to 2 MW. The PPA calls for the supply to be essentially firm at 48 weeks per year. It is not clear whether the factory will store bagasse to cover the off-crop period or whether fossil fuel will be burnt.

JAMAICA

The Planning Institute of Jamaica (PIOJ) has reported back to the government with its recommendations for the sugar industry. As could easily be predicted the PIOJ says that for any part of the government sector to survive it has to become a more like the Brazilian 'sugar + ethanol' model. It then goes on to say that the government cannot afford to fund such a change so it must find local or international partners. However, given the labour record of SCJ and the failure of the Bernard Lodge ethanol project, would you invest there?

YONKERS STRIKE OVER

It might have taken over six months but the Yonkers strike is finally over with the workers returning to work more or less on the conditions they refused to accept last December. As the union representative said, " very bitter pill to swallow".

VENEZUELA

The state oil company in Venezuela has announced that it is establish 300 000 ha of sugar cane estates with 14 plants to process the cane through to ethanol - by 2012. There is no indication of capacities so one cannot be sure whether the factories will be ethanol only or sugar and ethanol producers. The company claims that it will create "more than 1 million" direct and indirect jobs.





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