Sugar Industry News : September 2014
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WORLD PRICE
Just when people were saying that the world price must be heading up, it lost almost 1 ¢/lb in August to close the month at about 15.5 ¢/lb :
The betting does seem to be that it will pick up though as the March price is 2 ¢/lb higher than the October one.
SUGAR AND POLITICS
One suspects that sugar will always be a political football because humanity seems to crave for sweetness and wants it at little cost while the industry – particularly the sugarcane sector – has the potential to create a lot of employment. A couple of examples from this month’s news :
As usual Guysuco is close to collapse and all sides in Guyana are blaming each other no matter what the truth might be while the company itself slides further into chaos. What really struck home though was a statement by APNU [an opposition coalition] that ‘For this sector to survive, the PPP/C [party in government] must stop playing politics with sugar …’ which was, in itself, playing politics with sugar.
In India the state governments continue to mandate high prices for the purchase of cane from the farmers while the equivalent selling price of the sugar is only ~80% of that. No wonder the millers don’t want to start the crop.
GERMAN CAMPAIGN FORECAST
The German government is forecasting a good campaign this year with sugar production expected to be about 4.4 million tons. 2013/14 was 3.5 million tons. Part of the reason is an increase in land area sown which is up almost 5% on last year but the rest is an expected increase in yield resulting from the early spring following a mild winter which allowed farmers to sow early.
INDIAN SUGAR PRICE
The Indian millers, not at all happy with the current internal glut and low prices is suggesting to the government that it create a 7.7 million ton buffer stock over the next three years, just to take sugar out of the market because even with the export subsidy the world price is so low that they don’t want to export.
7.7 million tons is reasonable at only 4 months consumption but they do recognise that it is not a very good solution as the sugar has to ultimately come back out again and could cause a future glut [they have obviously forgotten 2005 and 2009 when the country produced only 15.8 million tons in each year]. Their alternative solution is to be allowed to divert juice direct to ethanol [which would help the government’s renewables objectives].
In a separate move the government has increased the import duty on sugar from 15% to 25%. It is seen as something which will benefit the whole industry.
INDIAN FUEL ETHANOL
In July we brought the news that the Indian government was talking of importing E85 car engines from Brazil. It has now announced that it wants a mandated 20% inclusion by 2017 which it probably couldn’t achieve without having such engines [assuming it can get the ethanol].
What is less clear is whether it really has the intention or whether it is responding to the internal surplus which is depressing selling prices and hurting farmers [aka voters]. It is also attractive to the millers as discussed above.
THAILAND CROP FORECAST
The Thai production in 2013/14 was a record 11.3 million tons and as the land usage swings across from rice to sugar that record could well be broken again next year, by as much as 10%. That is in the future though. The problem lies in today’s position with a lot of sugar not sold for export [the official expectation is 8.8 million tons] because the producers don’t want to sell at the current low price.
AUSTRALIAN RENEWABLES TARGET
The federal government seems to have caused chaos again in the renewable energy sector, including electricity export from sugar factories.
Some years ago it changed the rules because it encouraged so many people to install PV cells on their roofs that it didn’t have the money it promised for thermal renewable energy. This time it is contemplating scrapping its renewable energy scheme completely because it is too successful. Companies like Mackay Sugar, which has only just commissioned its station at the Mackay factory, are not at all happy but putting a brave face on it, declaring that they have a PPA until 2019. Five years is not long to break even on a major capital project.
SECOND US MEXICO TRADE WAR
The US Department of Commerce made a preliminary finding at the end of August that Mexico is unlawfully dumping sugar into the country. It has applied duty deposits on all sugar imports from Mexico pending its final finding. The rates vary, depending on the origin but the highest rate of 17.01% is for those factories still owned by the Mexican government. Most of the other factories have a rate of 14.87%, the exception being GAM at only 2.99%.
The expectation is that the Mexican government will retaliate by applying a similar duty on HFCS imported from the US. It is another case of ‘watch this space’.
BELIZE BARGE SINKS
BSI has always been hindered by the coastline and the barrier reef [world famous in diving circles]. Exporting its production involves a double handling cost as raws are barged out beyond the reef for loading onto ocean going vessels. Last month one of the presumably now aging barges sank on the trip through the mangroves, dumping 125 tons of raws into the water. BSI was pleased to announce that it didn’t matter as it was fully insured : no mention of the environmental impact. Does anybody care to calculate the BOD of 125 tons of sugar?
BELIZE FAIRTRADE
BSI’s farmers are wondering whether they are being heavily squeezed by the company’s owner, ASR. As reported here in previous months the farmers are in dispute with the company about how much they should be paid for their bagasse [don’t get us started on that issue again!]. As it happens, ASR also owns BSI’s key customer, the sugar arm of what was Tate and Lyle and that company has a Fairtrade agreement with the farmers.
Out of the blue, the farmers each received a letter from T&L reducing the agreement from a 50 000 t/a minimum to 10 000 t/a minimum. They will also now only get their payment when the sugar is sold. We are not saying that two issues are related but it doesn’t sound like fair trade does it?
GHANA KOMENDA PROJECT
People are beginning to question the wisdom of the Ghanaian government’s project to resurrect the Komenda sugar project, something reported here in the last few months. The questions being asked why the capital estimate is so low [$36 million] when it essentially means starting again and why repeat the errors of the past, the original project closing due to poor agricultural conditions.
SOUTHERN AFRICA ETHANOL
In April we brought the story of a company called Zimbabwe Bio Energy wanting to build an ethanol plant on Nuanetsi Ranch in the lowveldt. It turns out that it is owned by the Chisumbanje based Green Fuel company but it is not getting the permissions it needs so it is also looking at a $500 million ethanol project in the far north west of Zambia close to the Congo border.
BEET TO GAS
A group of East Anglian [UK] farmers have applied for planning permission to establish a 45,000 t/a anaerobic digester in their district, citing the uncertainty of demand for the beet after the end of the EU regime change in 2017 as the driving force for the project. Interestingly, they describe as an ‘essential’ break crop for them.
PRACTICAL BAGASSE GASIFICATION
The gasification of bagasse has been discussed and even piloted for quite a long time now so it is welcome news that a Florida based company called BioNitrogen is proceeding with a $300 million project next to US Sugar’s large Clewiston factory. The syngas produced by the gasification will be used to produce urea for use as a fertiliser.