Sugar Industry News : August 2016
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The world price finally fell back a bit in July. It had opened the month at about 21 ¢/lb and then gracefully declined throughout to close at just below 19 ¢/lb. The real followed suit :
The big question is whether we are seeing a sharp peak with a continuing downward trend or whether it will stabilise around the 20 ¢/lb level. As will be seen below, the Brazilian crop is being talked down and in India the latest [July] forecast is down from May's 24 million tons to 23 million so fundamentally the price should not collapse.
IMPACT OF BREXIT
The impact of the UK's departure from the EU is slowly sinking in. Yes, the EU sugar regime is due to end in a little over 12 months but that doesn't mean that the EU will be an open market thereafter and if the UK is outside ….?
Most commentators have been expecting ASR to announce the closure of its Thames refinery in London but if European companies can no longer sell to the UK then it will be needed to make up the 1 million ton shortfall between demand and domestic beet sugar supply – without the constraints of EU import restrictions.
Similarly, France's Tereos must be regretting its purchase of Napier Brown in the UK last year, establishing what it thought would be a foothold in the UK market for exporting French sugar to there.
BRITISH SUGAR RAISES 2017/18 BEET PRICE
British Sugar is offering its beet farmers an 8.4% price rise for next season with talk of a potential bonus too. The deal was finalised in July so agreement may have been affected by the Brexit vote.
BRAZIL / EU AGREE COMPENSATION FOR LOSS OF CROATIAN MARKET
When Croatia joined the EU in 2013, its sugar market was effectively closed for imports. The WTO has been trying to get the two parties to reach an agreement ever since and now Brazil is claiming that they have [although the EU seems strangely silent on the issue at the moment]. It is reported that the EU will allow an extra 114 000 tons of Brazilian sugar in at a low tariff for the next seven years.
IRAN STARTS BUYING SUGAR
Iran's Government Trading Corporation bought two 60 000 ton cargos from Brazil in July, something which it is now allowed to do legally as trade sanctions were lifted earlier this year.
INDIAN EXPORT DUTY CAUSES CHAOS WITH RE-EXPORTS
We reported last month on India's new export duty on domestic sugar. It now seems as if the regulation was badly drafted so that imported raw sugar was not excluded. It is reported that 200 000 tons of re-export raws have been held in ports, the customs demanding that duty be paid and refiners demanding that the regulation be clarified.
ASEAN SUGAR ALLIANCE FORMED
Last month, six of the ten countries of ASEAN signed an MoU which brings into existence the 'ASEAN Sugar Alliance'. The signatories were Cambodia, Indonesia, Myanmar, the Philippines, Thailand and Vietnam. Malaysia was also at the meeting which produced the MoU and agreed in principle but did not have authority to sign. The remaining three ASEAN countries are Brunei, Lao and Singapore.
AUSTRALIA STARTS RESEARCH ON BIOGAS FROM CANE TRASH
A private company in Australia has teamed up with Manildra Harwood and two universities to investigate the technical viability of digesting cane trash and then using the resultant mash to make biogas. The company says that the solid waste would be a suitable fertiliser but what about the liquid waste?
ROCKY POINT POWER U/S
The power station at Rocky Point – always a troubled project – has, apparently, not operated for the last six months because of cracks in the boiler. The plant came on line 15 years ago so should not have any serious issues. It was built by France's Alstom which then decided to rid itself of its industrial boiler business, selling it in 2005 to Austrian Energy [now called Austrian Energy and Environment]. Unfortunately for the owners of Rocky Point, AE&E Australia went bankrupt about 4 years ago.
US / MEXICO NEGOTIATIONS UNDER WAY AGAIN
It seems that the US and Mexico are in discussions again about the NAFTA sugar regime, less than two years since they [apparently] finally settled their differences. It is reported that the US wants to tighten the definitions of raw and refined sugar whereas Mexico wants to ensure that the existing quota of 53% 'refined' sugar remains in place. It is also reported that the US wants to limit imports to proper refiners [those that run purification and crystallisation] to the exclusion of polishers [those that do not crystallise].
DATAGRO REDUCES BRAZIL FORECAST
In mid-July Datagro reduced its forecast for the Brazilian crush by 28 million tons to just below 600 million, citing dry weather but also mentioning reduced crop inputs and increased infestation of pests resulting from the poor financial state of the industry. The forecaster expects sugar production in the centre-south to be 1 million tons lower than its May forecast.
CARGILL'S PESSIMISTIC VIEW OF BRAZIL
Last October we reported on Cargill's purchase of the bankrupt Brazilian group Ruette and its two sugar factories. This was done via its Black River Asset Management arm and was kept out of Alvean, its jv with Copersucar. The Cargill appointed CEO of Ruette has now been quoted saying that only about one quarter of the 80 factories currently under bankruptcy protection will survive and there are probably another 50 which are not protected that will just collapse. There are already less than 300 factories operational in the centre-south.
FIRE AGAIN AT SANTOS PORT
Another conveyor belt fire broke out at the Cosan facilities in Santos port last month, this time with little disruption to the normal activities of the port. The fire was on a belt connecting two sugar receiving warehouses.
In other Santos news, the trading arm of China's COFCO has switched its grain export terminal in the port to a sugar exporting one, stating that it expects to ship about 1 million tons from Santos in the next 12 months.
ADM TO LEAVE SUGAR COMPLETELY?
It is rumoured that ADM will close to down its already shrunken sugar trading arm. It makes sense to do so, given that ADM is fundamentally a grains based company.