Sugar Technology
On-line News

August 2006

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This month is very much a mixed bag : read on ...


USA v MEXICO ENDS IN DRAW

The long running sweeteners trade dispute seems to have ended in a draw with each country accepting 500 000 tons of the other’s sweetener [sugar from Mexico and HFCS from the USA] between now and 2008 when the trade becomes free in any case under the NAFTA agreement.

All this was made known as part of a USDA announcement. The web address is very complicated so we have copied the words to here. Note that the government increased the special imports this year by a further 100 000 tons to compensate for the losses caused by last season’s hurricanes.

Shares in companies like Tate & Lyle rose on the news : it has both a sugar producer in Mexico and an HFCS producer in the US.

Mexico produces something in excess of 5 million tons of sugar : this year’s total [November to October] is 5.28 million, down ~9% from last year’s record 5.8 million. In part the reduction reflects the labour disputes which delayed the start of crop in later 2005.

WTO

The ‘Doha Round’ of WTO negotiations was indefinitely suspended in late July as the gaps between different factions stayed wide. Commenting on the suspension, ISO suggested that the current reforms of the sugar sector [perhaps thinking forward to the US?] will be hindered but indicated little impact on the world price.

Quite interestingly, within the US itself there seems to be some internal pressure to reduce or even scrap sugar subsidies. Congressmen of both sides of the house have signed up but presumably none of them come from sugar producing states ….

WORLD PRICE

The world price continued its slow downward trend in July, recovering from the Australian smut scare which is now reported to be less severe than first thought. It closed the month at about 15 /lb. However, at least one analyst was predicting a climb back to 17 /lb in the short term “as Brazil switches more sugar to ethanol” and another was predicting a mean value of 19 /lb in the last quarter of this year : watch this space!

ILLOVO

The shareholders of Illovo Sugar have overwhelmingly approved the company’s take over by ABF, the mother company of British Sugar. The deal also has Reserve Bank approval but is still subject to other regulatory approvals. These are unlikely to prove to be an obstacle however.

KINYARA

The privatisation of Kinyara did take a decisive step in July despite our pessimism last month : the price bids [for a controlling 51% of the company] were opened and accepted by the government. Madhvani, the local sugar producer was lowest with $23.7 million, followed by TSB/Booker Tate [the current managers] at 27.4 million. The winner though was the Rai group from Kenya [a private forestry company from Kenya] at 33.5 million. It isn’t all over yet of course : there will be a lot of negotiation before all the details are finalised and those negotiations may well collapse leaving TSB a clear run.

CDC RETURNS TO AGRIBUSINESS

The UK government’s Commonwealth Development Corporation declared that it wasn’t interested in the poor returns from agriculture when it was commercialised some years ago and renamed CDC Group plc. Are we about to see a change of mind? It recently announced a $100 million dollar commitment to an agribusiness development fund for Africa and the CEO was quoted as saying that “Agribusiness has been a core part of CDC's investments in Africa over the past 50 years and today's announcement emphasizes our continuing commitment to the sector.” One suspects though that all the company has done is dump its residual holdings in various agribusinesses into the new fund.

IRISH SUGAR

Greencore, the mother company of Irish Sugar, is not happy. It had assumed that it would get 90% of Ireland’s EU sugar industry restructuring fund of €145 million but the government only awarded it 70%, giving the rest to beet growers and contractors. The problem seems to be that under EU rules the growers are entitled to at least 10% which Greencore took to mean ‘and no more than 10%’. It has been granted leave to seek a judicial review of the decision, so watch this space …

HOLLAND

CSM is selling its both its sugar plants to Suiker Unie. Surely though this can only be the start of a process which will see some rationalisation within the country’s industry as the sugar reforms start to bite?

ETHIOPIA

It looks as if privatisation is again on the cards in Ethiopia although the political unrest which halted the last attempt has not really reduced with the opposition still refusing to accept the results of 2005 election. The government has announced its desire to form joint ventures for the existing estates and for foreign investors to build new ones.

It wants to produce 1 million tons of sugar by 2011, up 350% from today’s 280 000 tons. Most of the increase would come from a new 60 000 ha estate in the Awash valley where a new irrigation dam is already in place but the intention is to also triple production at Metahara and Finchaa and achieve a more modest increase at Wonji/Shoa. How the increase will be achieved at Metahara – the only remaining land is owned by gun-toting tribes people.

JAMAICA

In June we reported the start of privatisation of the SCJ. It has now emerged that the company has a US$ 40 million overdraft [with a government bank – which makes little sense] bearing interest at 43%. The CEO of the company has also unexpectedly resigned.

In the meantime, the government seems to be hedging its bets : the new Prime Minister signed a US$100 million line of credit with Brazil last month, solely for sugar manufacturing equipment..

FIJI

It looks like the Fiji Sugar Corporation has fallen out with its Indian technology mission supposed to be rescuing the industry. An FSC official has even been quoted as saying that there never was a contract, just an MoU. Fiji has a long tradition of seemingly racial tension between Indians and native Fijians.

LACASSINE

It now looks as if the new Lacassine syrup mill owned by Louisiana will be sold outright to the private sector but Bob Odom, the State Agriculture Commissioner, is keeping quiet about who the leading buyer is. As the mill has not yet been fully commissioned there must still be some action to come.

TECHNOLOGIES

Australia is experimenting with a new [for Australia] cane ripener from Syngenta in advance of an expected approval in 2007. The un-named ripener is claimed to improve sugar content by 15% in Brazil where it is, apparently, widely used. The product may be ‘Touchdown’ which is a glyphosate based weedkiller. Syngenta also makes Fussilade.

Meanwhile, in the USA, a different application of weedkiller : the Beet Sugar Development Foundation has been demonstrating 560 acres of ‘Roundup Ready’ sugar beets in the Midwest with good results. Not only are the weeds easier to control but there is no apparent set-back to the beet plants, unlike when conventional treatment is applied to conventional beets.

The beets are understood to have all required approvals for use in human [and animal] consumption in North America, Japan and Australasia and applications are in for EU and other approvals. Amalgamated Sugar, the company which cooperated in the demonstration plots, will therefore process the beets at the end of the campaign and then mix the sugar with the rest of its production.

SUGAR SHIP FOUNDERS

A ship carrying a cargo Queensland sugar to South Korea struck a reef off the south east tip of Papua New Guinea in early July. In order to float it off it was necessary to melt and pump off part of the cargo. At this stage it is unclear what environmental effects there may be on the local coral reefs.





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