Sugar Industry News : September 2016
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For once our assessment of the fundamentals proved to be correct with the world price remaining at around the 20 ¢/lb level :
Whilst all commentators agree that we will continue to see a deficit in supply, there is some debate as to whether it will get increase or reduce. ISO has gone to so far as to say that world stocks are falling to a 'critically low level' which implies that in some countries there can be no stocks. ISO's forecast for the 2016/17 is for supply to increase to 168 million tons but for demand to also increase to 175 million.
CRISTAL UNION INVESTS IN CROATIA
France's Cristal Union co-op has invested an unspecified amount to purchase 17% of the shares of Viro Sugar in Croatia. Viro operates two sugarbeet factories and produces about 200 000 tons of sugar a year. Croatia joined the EU in mid 2013.
MAHARASHTRA FORECAST CONSENSUS IS 5.2 MILLION TONS
Back in May we reported that the Indian federal government had asked Maharashtra to impose cane limits due to water shortages. At the time it was being said that the 2016/17 crop would be down by 40% and this seems to be the case. The land area under cane is reported to be < 80% of last year and presumably the yield is poor too as the state is predicted to produce only 5.2 million tons of sugar, about 60% of last year's production.
On a more positive note, this year's monsoon has been good with the state receiving 'above normal' rainfall.
MAHARASHTRA COOPERATIVE FACTORIES TO BE AUCTIONED
At the end of August, Maharashtra's State Cooperative Bank started looking for buyers for another seven sugar factories owned by various cooperatives in what it called a 'distress sale'. It is reported that none of the factories has operated for the last two crops. The collapse of sugar co-ops in the state seems to be a regular thing and not related to the current drought-affected crop.
WILMAR AND QSL DISCUSSIONS BREAK DOWN
In late August Wilmar announced that its discussions with QSL acting for some of the cane farmers had broken down, adding that it didn't stop individual farmers signing the Wilmar cane contract. It seems that the main issue is a cash flow one because QSL currently pays the farmers some of their money when the sugar arrives at the terminal but Wilmar's contract would only pay them [all of the money] when the sugar was loaded.
BRAZIL CROP UNCERTAINTY
It is unclear what the current crop in Brazil's centre south will finally be with some commentators talking it up and others, notably Brazil's Datagro, talking it down. That company is forecasting sugar production of 34.1 million tons, down from 35.2. There are also some which are going against the natural trend [the sugar price is high and the oil price is low] and pushing up the percentage of cane going to fermentation. What do they know that we don't?
BRAZIL'S PRODUCERS SELLING EARLY
One impact of the current high world price [and low value of the real] is that the producers in Brazil are selling much earlier than usual in order to lock in to that price. It is reported that about 4.3 million tons had been sold for 2017 delivery by the end of June : Raizen alone had had sold about a million tons.