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Quite an interesting month, no sign of the northern hemisphere holidays :
The world price was well above 19 ¢/# for much of the second half of July and looked to be heading through 20 ¢/# by the end of the month :
What is less clear is what happens next as the forecasters are clearly out of touch. In the middle of July the consensus seemed to be that we might reach 19 ¢/# by the end of this year with prices around 18 ¢/# through 2010.
Much of the price rise is driven by the situation India of course. Sucden, for instance, is predicting that India will have to import 5 million tons in 2009/10 and this is reinforced by the government signalling that it will allow companies to import sugar without a future re-export obligation until March 2010.
The monsoon rain record is not good either so current forecasts for India might even be optimistic. The government’s Meteorological Department report issued at the end of July shows that many states have experienced a ‘deficient’ monsoon to date [20 to 59% less than normal rainfall] and the monsoon in Western UP is characterised as ‘scanty’ with a reported 40% of normal rainfall. You can see the report - complete with colour coded maps - on the internet.
Following the article in last month’s news, the government in Indonesia has now announced that it will not permit any more sugar refineries to be built. In doing so it did confirm however that there are now eight refineries there : a country which used to be self sufficient in sugar.
The cane crop has finished in China and the results of the bad weather at the start of the year are now clear to see : the country is reporting total production at 12.43 million tons, only 84% of the previous year’s output.
At the start of the month, CSR predicted that its 2009/10 harvest would be 10 to 15% lower than the previous year’s, citing the Queensland flooding earlier in the year. This was supported by the government’s own forecast which was for a crop of 31.3 million tons cane, the lowest since 2001. By the end of the month however, people were talking up the crop saying that it was likely to be similar to the last one.
Meanwhile, the race for CSR’s sugar division [see last month’s news] has started even before the gun has gone off. CSR is saying that it hasn’t yet decided how it is going to go about the demerger but it has apparently been advised to sell only 20 to 25% to a ‘cornerstone’ investor in the first instance. [That would apparently have tax advantages for shareholders.] It says that it is at least two months away from finalising its plans.
The grapevine, on the other hand, says that four or five companies have already expressed interest. Those named are ABF / British Sugar, Brazil’s Cosan, Cargill, Germany’s Suedzucker and Korea’s CJ.
Germany’s Suedzucker has made it clear that it wishes to expand by acquisition and the target countries specifically mentioned by the company’s new CEO were India, Brazil and Russia. What was perhaps most interesting is that he didn’t mention Australia – see above.
TANA DELTA PROJECT
It looks as if the sugar cane project in Kenya’s Tana delta will go ahead with some legal hurdles cleared and Mumias discussing how to raise the $400 million it needs to undertake the project. The company is targeting a production cost of < $160 per ton, pointing out that the cane will mature much faster than at Mumias itself.
Meanwhile, a company called Kwale International, which has a license to revive the ill-fated Ramisi sugar project [it collapsed in the 1970’s], announced a similar timetable to that of the Tana Delta. The two projects are both coastal, the Tana Delta being about 200 km north of Mombassa and Ramisi being 60 km south.
BIO-FUELS SOUTH AFRICA
The USDA’s annual report on South Africa’s bio-fuels programme makes interesting reading as it shows that things are now [slowly] moving forward despite the government’s heavy investment in Sasol’s coal to liquid fuel technology. The country is committed to a target of 8% bio-ethanol in its gasoline by 2013. The Eastern Cape beet project is mentioned as being closest to implementation but the USDA points out that no farmer has yet agreed to grow any beets –despite the project starting as a farmers’ cooperative]. Two cane based bio-ethanol projects are also mentioned : one at Hoedspruit near the Kruger Park and the other in what used to be called the Transkei south of the Natal cane growing area so more or less on the same latitude as the Eastern Cape beet project. You can read the full report on the internet.
It was Illovo Sugar’s AGM last month so we learnt more about its performance and plans. The company, controlled by ABF – the owner of British Sugar, expects to increase production by about 275 000 tons this year thanks to the expansion at Nakambala so it will reach ~ 2 million tons.
Expansion is already under way at Maragra in Moçambique and is about to start at Big Bend in Swaziland. However the most significant project is the proposed new factory in Mali which, we are told, is ‘progressing, albeit slowly’. Commercial cane planting is scheduled to start in the first quarter of 2010 with the first sugar produced in December 2011 so seed cane production must be well under way. The unit is being designed for an ultimate annual capacity of 195 000 tons of crystal sugar and 15 million litres of ethanol.
TH have developed a round CVP but it is vertical, not horizontal so perhaps the real headline should be that TH have developed a vertical CVP. The first unit should be commissioned soon at the company’s Xinavane mill in Moçambique, currently being expanded. No drawings are available but it is understood to consist of two stacked calandrias and is intended for ‘A’ sugar.
As predicted, Imperial began shipping bulk crystal sugar from its rebuilt Savannah refinery towards the end of July. The next target is the completion of the packing plant in the last quarter of this year.
FLORIDA STATE AND US SUGAR
Florida’s planned $536 million purchase of some 73 000 acres of US Sugar’s land is in the news again as opponents released details of a proposed money raising scheme. The state needs to borrow about $2.2 billion to implement all of its plans for the land and it appears that it is expected to be so difficult to raise that amount that the state is planning to put up 283 000 acres of the Everglades as collateral for the loan.
The end of sugar production in Hawaii is on the cards as Alexander & Baldwin considers what to do with an $11.3 million loss from its agribusiness division, the operator of the one remaining factory at Puunene on Maui.
Following last month’s news about the sale of Duckenfield and Long Pond / Hampden, reducing SCJ to three possibly viable units, it seems that Italy’s Eridania is well on the way to clinching a long term deal. The company is reported to have agreed to pay $15 million for 79 000 tons of raw sugar and ‘50% of the profit from the sale of the three estates’. It is unclear what that means as the companies have such massive debts but it probably means half the sales price so if Eridania buys the three it gets them for half price. The cash will be used to support the current crop.
The USDA’s annual report on Venezuela also makes interesting reading as it shows the effect of the government’s price controls. As a result of a lack of profitability, production is reported down 15% since 2005 and the USDA estimates that it will fall again in 2010 to only 540 000 tons. If correct then production will have fallen 26% in five years. Again, you can read the full report on the internet.
Cargill has bought out its Japanese partner in NatureWorks, the leading company in the production of polylactic acid [PLA] a renewable feedstock based polymer. PLA is made from lactic acid which can be produced by fermenting a range of different sugars including sucrose. At the moment it is almost certainly made from corn starch [the plant is in Nebraska] but Cargill have just announced the launch of the product into Brazil so we can expect to see a cane based version before too much longer.