Sugar Industry News : October 2016
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Another amazing leap in the price - which might have broken the link with the real :
September started with a flat curve but in mid-month there was a leap and in the days that followed the intra-day price more or less reached 24 ¢/lb. What nobody seems to understand is what caused the price to rise so much so nobody really knows where we go next.
EU/SADC ECONOMIC PARTNERSHIP BECOMES EFFECTIVE
The Economic Partnership Agreement between the EU and part of the Southern African Development Community, announced in June this year, will become effective at about the time you read this. The African countries involved seem to be those in the Customs Union [Botswana, Lesotho, Namibia, South Africa and Swaziland] plus Moçambique. It seems that Swaziland will have full duty free access for its sugar but South Africa will be limited to 150 000 tons duty free.
UKRAINIAN PRODUCTION SOARS
Sugar production in the Ukraine is forecast to increase by about 20% in the 2016/17 year. Astarta, the country's largest sugar producer, is expecting exports to be 500 000 tons in the same year. The country's problem is quality however : it will have to sell at a discount to the EEC2 price.
ZIMBABWEAN DROUGHT TIGHTENS
Drought conditions in Southern Africa continue and the Zimbabwean Lowveld looks as if it may well lose all of its water supply. Lake Mutirikwi – Lake Kyle as was – is down to 6% of its capacity and the rains will not arrive for at least another two months. The last time this happened, in the mid-1980's, the factories were closed for two years with cane plants being sent to the north of the country to provide seed cane for when cane agriculture could start again.
ALTEO SEES PROFITS FALL
Alteo, one of the Mauritian sugar conglomerates, has reported a 23% fall in pre-tax profits but was remarkably vague about the reasons, trying to talk up the potential for improvement from its sales to the EU – presumably after the regime change becomes effective in 12 months' time – and production in Tanzania [TPC] and Kenya [Transmara].
PAKISTAN'S USC CANNOT BUY SUGAR
In the first quarter of this year Pakistan was subsidising the export of 500 000 tons of sugar so the domestic price rose by about 10%. Since then the world price has increased dramatically of course. The Utility Stores Corporation sells provisions to the poorer members of the community at subsidised prices but now it finds that it cannot buy sugar at what it thinks is the right price. It is calling the millers a cartel for tendering too high a price and wanting to go to court.
22 MILLION TONS ESTIMATED FOR INDIA THIS YEAR
With drought stricken Maharashtra expecting only 60% of last year's production, India is now forecasting a total production of 22 million tons for the 2016/17 year. Given that at least one demand estimate for the same period is 26.5 million tons it is not surprising that the world price has reacted.
INDIA LIMITS MILLERS' STOCK HOLDINGS
In September the federal government in India decreed that millers could not hold more than 37% of their production by the end of the month and only 24% at the end of October in an effort to stop hording and thus limit price increases. The millers challenged the edict and the limit value saying that there was no market demand [at the prevailing high prices] and hence stock levels could not be reduced when required.
TTC WANTS TO LIST IN SINGAPORE
Vietnam's Thanh Thanh Cong has always been ambitious and now it has moved an executive to Singapore to start working on a local listing in five years' time. TTC came to prominence five year's ago when it emerged from the murk of socialism and effectively took control of Tay Ninh from Sucrerie de Bourbon. It now owns 18 production facilities in Vietnam, half of the country's total.
CHINA EXPECTED TO SELL OFF STOCKS
China is expected to sell between 300 and 500 000 tons of its sugar stock in the short term – only 4 to 7% of its estimated 7 million ton total holding. The move follows similar sales of other agricultural commodities.
ABF CONFIRMS SALE OF ITS CANE BUSINESS IN CHINA
Following our report in June this year that AB Sugar wanted to sell its business in China for $1 billion, it has announced that it has agreed to sell the five cane factories in Guangxi province to Nanning Sugar for $500 million.
WILMAR CANCELS QUEENSLAND SUGAR STORE PROJECT
Following last month's news item about the collapse of the talks between QSL and Wilmar, the company has announced the cancellation of its proposed Aus$ 75 million project to build a sugar store.
Interestingly, the company is no longer flagging that the talks have collapsed as an agreement was reached between MSF and QSL [for the growers] on the new sugar selling arrangements and a growers' group threatened to take Wilmar to arbitration if it didn't accept the new arrangements. MSF has stated that it expects to sell 80% of the sugar produced in its factories next season, leaving only 20% for QSL so perhaps the millers will succeed even with growers having a choice.
GUYSUCO SELLING OFF LAND
The highly indebted Guyana Sugar Corporation has started to advertise 800 ha of its land for sale. However, the fundamental problem with the company is the cost of production – reported to be 40 ¢/lb by one Jamaican newspaper [not that Jamaica has anything to boast about] – so selling assets is just delaying the inevitable.