Sugar Technology
On-line News

October 2009

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An interesting collection but the world price still leads ...


The world price spent last month bouncing around 24 USą/lb [depending on which contract you look at] and it looks to stay there.

In July we quoted Czarnikow as expecting a 6 million ton deficit in 2009/10. Last month it revised that upwards to 9 million tons and pointed out that whether 6 or 9, following the 15.7 million ton deficit of 2008/9 there were no reserves left globally so ‘price will need to ration demand’ in 2009/10.

The high world price has led to the usual claims of hoarding by producers and traders around the world, not least in Pakistan. India continues to import of course and has even gone so far as to ask the big industrials like the bottlers and the sweet manufacturers to buy their own sugar on the world market.

In Pakistan itself, there seems to be a real shortage like that in India with the government predicting a 1.5 million ton shortfall in 2009/10. It has approved the import of 350 000 tons of sugar before the start of the next crop and has announced that it would permit the private sector to build a refinery in Gwadar, a port in the far south west of the country close to the border with Iran.


The U.S. Chemical Safety Board has published its report on the February 2008 Savannah explosion(s), stating that the incident was ‘entirely preventable’. 14 lives were lost as a result of the event.

Details of the investigation, including a link to the final report, are available on the Chemical Safety Board domain.

The report confirms that the primary explosion was inside a conveyor under two silos that were inadequately designed and had accumulated a lot of sugar dust. One of the issues that the report highlights is a lack of evacuation training and that even the emergency lighting was taken out by the explosions.


Following last month’s news that GM beet had ‘escaped’, a US federal judge has overturned the USDA approval of ‘Roundup Ready’ beet but has not yet announced what that means. The ruling states that the USDA should have prepared an environmental impact statement assessing the consequences of the likely spread of the GM trait to non-GM beets or to related crops such as Swiss chard or beetroot. Campaigners against GM crops are hoping that he will ban the sowing of GM beet.


It seems that NAFTA is flawed with respect to sugar : Mexico is allowed to sell as much locally produced sugar as it likes to the US [or, presumably, Canada] and import sugar to make up any shortfall.

The USDA had expected Mexico to export about 500 000 tons to the USA in 2008/9 but the final figure was actually close to 1.3 million tons. Luckily for the government the demand for sugar was high so the market could absorb the extra but if the trend continues the government might be forced to buy the sugar and dump it into the US ethanol programme.

Meanwhile, in Mexico the weather resulted in a poor harvest so production was well short of the 5.5 million tons predicted so the government has said it will permit 900 000 tons of imports, 550 000 of which is already assigned. The producers are now lobbying to have the tenders for the remaining 350 000 tons cancelled….


The judge in the case brought against Florida’s proposed purchase of 73 000 acres of US Sugars land by Florida Crystals, Miccosukee Indians and others has published his finding in favour of the deal – but it only allows the state to issue $ 650 million of debt. The state has said that it needs $2.2 billion to make the purchase worthwhile.


The extent and impact of the weather issue in Brazil that we reported last month is becoming clear. The cane area of Sao Paulo state – most of the Centre South region – received 177% of its normal rainfall in July but in August that shot up to 447% of normal and the heavy rain persisted though September. Some estimates put the lost days at 45 and there is general talk about continuing the crop beyond the normal end date.

The net result is that the latest forecasts have Centre South producing only(!) 29.35 million tons of crystal sugar, down almost 2 million tons from the April forecast. That is not to say that production is down : it is up because of the switch from ethanol to crystal driven by the high world price.


Brazil has introduced a ban on planting sugarcane in 82% of the country in response to claims that its ethanol production is leading to deforestation in the Amazon basin. That still leaves plenty of room for expansion for what is already a 600 million ton annual crop.


The ACP has pointed out an anomaly caused by the high world price coinciding with the EU’s reduced internal price : the two have flipped so it doesn’t pay in the short term to sell to Europe. [Of course this isn’t something new : Jamaica famously ignored its UK quota in the mid 1970’s and made good money for one year but suffered thereafter as its quota was withdrawn.] ISO had been predicting that ACP and the LDC’s would increase exports to Europe from the current 1.9 million tons to about 3.4 million by 2014 but it is now starting to rethink.


Russia has unveiled an ambitious three year plan for its sugar industry, suggesting that it needs to invest up to US$ 2 billion, one quarter of which would come from the government itself.

Beet sugar production in 2009 is forecast at 3.05 million tons [down from the record 3.55 million of 2008] but the plan calls for this to be increased to 4.32 million tons by 2012. To do that the plan calls for an increasing in planting area to 981 000 ha and, more importantly, an increase in yield from about 30 t/ha to 38.6 t/ha and an increase in sucrose content : quite a challenge.

The whole plan is predicated on three things : the weather [no surprise there then], Russia not joining the WTO [which would force it to reduce its import duty on sugar] and the market [no surprise there either].


Most observers and the main players within Thailand are predicting an early start to the 2009/10 crop. Part of the reason is the high world price [catch it while you can] but another issue is a molasses shortage which is impacting on ethanol production and hence availability and the local ethanol price. The distilleries are running at only 75% of capacity.


The details of the Maryborough bid for Tully became clearer in September but the offer was soon rejected by Tully. Maryborough is offering 13 of its own shares for each Tully share so the value of the bid depends on the former’s price. In fact that price increased on the news, valuing Tully at about Aus$ 98 million. The Tully board has to wait for the formal offer which is due at about the time that you read this but it has already stated its belief that shareholders would be better off with an independent company, pointing out that Maryborough paid a higher multiple of earnings when it bought Mulgrave last year and since then the world price has strengthened considerably.


CSR has confirmed that its proposed demerger of the sugar division is ‘on track’ for completion by the end of March 2010. Notably, it referred to the proposed new company as its ‘sweetener and renewable energy’ division. There was no more news about potential suitors during the month though.


The Sudan looks as if it will be an investment hotspot for a while. Kenana is predicting that the country will triple sugar production within three years. It recently announced a joint venture with an Egyptian investor called Beltone to develop agricultural project worth up to $1 billion. Now a second Egyptian company called Sabina has announced that it is leasing over 200 000 ha of land in northern Sudan for 99 years with sugarcane prominent in the list of crops.


It seems that the natural sweeteners in stevia have been identified and one of them in particular, steviol glycoside rebaudioside A [Reb A for short], selected as ‘close to sugar’ in sweetness. However, it seems to exhibit characteristics similar to thaumatin, the natural sweetener from Thaumatococcus daniellii, with a fair proportion of the population reporting liquorice aftertastes. It doesn’t sound as if the HFCS industry has too much to worry about yet.

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