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As might be imagined, much of the material on the wires in August related to the EU and the WTO findings on its sugar regime. This seems to have blocked out much of the other news but we have found a few items worthy of mention. The sugar price weakened a bit to drop back below the 8 ¢/lb mark.
EU / WTO
Perhaps the biggest surprise of the month was the continuing lack of comment from the EU on the WTO findings that it was in breach of trade rules with its sugar regime. Whilst that may be a deliberate ploy by the Commission, it might equally be a reflection of the northern summer lull with everyone on leave. This year’s lull is made much worse by a complete change of personalities as Commissioners. Mariann Fischer Boel from Denmark is taking over the agriculture department and the UK’s Peter Mandelson is taking over the trade department.
About the only announcement we could find was that the EU wanted to meet with the ACP countries to discuss the sugar regime in Brussels in September. Later in the month the ACP countries announced that they would hold their own meeting in Guyana before attending the Brussels meeting and that they would be attending Brussels ‘with one voice’.
The last texts published were those we referred to last month about the EU’s own proposed reforms of the sugar regime. Although there is no formal comment, talking to industry commentators one gets the clear impression that the Commission will fail to get its proposals ratified. There are now 25 member states in the EU and, we understand, every one of them would have to agree to the changes.
CARONI TO MAKE A PROFIT
Actually now called Sugar Manufacturing Company Ltd and without Brechin Castle factory, Trinidad’s resurrected Caroni seems to have made a profit even though it only made 42 000 tons of the budgeted 60 000 tons in its first crop. The prime reason appears to be that it no longer employs the 9 000 workers who were made redundant : they presumably now appear on the government’s books as unemployed.
BARBADOS RUNS OUT OF SUGAR
It seems that Barbados cannot even make enough sugar for its own use, presumably because it exports what production there is to the EU and US in order to benefit from its lucrative preferential quotas. Last month there was literally no sugar available in the country until a shipment arrived from Guyana.
In another wire story last month, it looks as if the government is going to commission a study to utilise sugar by-products. [One report even reported about the island’s ‘fledgling’ sugar industry.] What is not said is where the by-products will come from as the sugar industry collapses.
A newspaper article from Jamaica caught the eye last month, commenting on the island’s sugar industry and the probably impact of the changes coming to the EU regime. The columnist, writing in the Jamaica Observer, used the government’s own figures to show that even if it had sold all of its sugar production at the preferential price it would still have made a $12 to 16 million loss each year – and that was using the SIA’s 24 ¢/lb figure for production cost which many observers consider to be substantially understated.
The Thai government has now approved a total of six sugar industry power ethanol plants, taking planned production over the million litres a day mark. [The government’s programme is so new that none of the units is yet in operation.] There are another 31 applications in the pipeline so the proposed 3 million litres a day target by 2007 seems achievable – provided that the market is there. The government has indicated that it will deliberately limit permits to “maintain price stability in line with market demand”.
TULLY COGENERATION STATION
Tully mill in northern Queensland [just over halfway from Townsville to Cairns] has signed a co-generation deal with Ergon, one of Australia’s power companies. Unfortunately the announcements were high on hype and low on technical content so we cannot tell you too much but the claimed 40 GWh out put from 205 000 tons of bagasse does not look impressive.
Illovo’s sale of Monitor Sugar to a growers’ co-operative was completed during August at $40 million [ZAR 245 million], 90% as cash and 10% as a promissory note carrying 10% interest. What is less clear is whether the $40 million is a real figure or whether one has to deduct $20 million as Illovo was reported to state that “on receipt of the cash it would immediately settle $20 million loans in Monitor Sugar”. The ZAR 350 million book value of Monitor is well above the sale price but as the rand is more or less at the same dollar exchange rate as when the book price was struck ,Illovo cannot blame the rand. If only they had sold two years ago when the dollar gave you twice as many rand : ZAR 490 million would have looked good.
Beet processors in Wyoming are seeking a long term fixed price gas contract heavily subsidised by the state. Gas is currently about $5.50 per million Btu’s but the contract they seek is for $3.50 fixed for six to ten years, the threat being that they will have to close if the fuel is not subsidised.
The Madhvani group have secured a $8.5 million loan from the East African Development Bank for its proposed co-generation project at Kakira in Uganda. The group has been seeking bids for boilers for some time so implementation could be soon. Once complete, the power station will be rated at 14 MW with the capability of exporting up to 6 MW during the crop. It is unclear whether the company intends to burn auxiliary fuel in order to deliver firm power.
Peru is the latest country to be negotiating a free trade agreement with the USA. It is offering to eliminate all tariffs on 41% of US imports [37% of the dollar value] in exchange for free access to the US for its sugar. Its current quota is just over 43 000 tons. Does it really expect to be able to import all it wants at today’s preferential price?
Following our note last month about Bosnia now being under the EU spotlight for illegal exports to the EU, it appears that there may be up to 250 000 tons involved over the last three years. That is the quantum which the government admits to have issued import permits for above the country’s domestic requirements.
Serbia, meanwhile, has ‘guaranteed’ the EU that all future sugar exports will be genuine, having put in place new regulations.
AUDUBON OPENS NEW FACILITIES
Travelling the world, one meets many illustrious alumni from LSU and / or the Audubon Sugar Institute in senior positions in the sugar industry. Last month saw the official opening of the Audubon’s new facilities out at St Gabriel, already the home to LSU’s AgCenter. Moving from the cramped main campus out into the Louisiana countryside will help the Audubon continue to develop.