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November 2011

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Quite a bit of technology [for a change!] :


The world price had a somewhat stable month, trading in a range about 26 ¢/lb. It closed October at more or less exactly the same value as it closed September : 25.3 ¢/lb :

World Price

However, one wouldn’t want to be predict where it is going next with so many contrary factors around.


In mid October the EU Commission said that quotas ‘should’ finish when the current programme expires at the end of September 2015. However commentators are saying that it may take another 4 or 5 years to actually implement. No sooner had the statement been made than the ACP group of countries complained loudly as, after all, they are the ones most likely to suffer.


Cristal Union, the French sugar cooperative, has taken control of Societé Vermandoise, a group of cooperatives with four factories in northern France. The deal should give Cristal about 30% of the French quota and a production capacity of some 1.5 million tons of crystal and about 5 million hℓ of ethanol. The deal is worth € 1 billion [$1.3 billion].


Last month we reported that the Federal commission which advises the minimum cane price has indicated that it should be 170 rupees per quintal [~US$ 35 per ton]. It now emerges that the millers in UP are expecting a further increase in that state’s minimum price which was set at 205 rupees per quintal for last year. On that basis we can expect a flood of sugar from India next year.


A Bangladeshi company called City Group is claiming to have set up ‘the world's largest sugar refinery’ in that country with a capacity of 5 000 t/d [it is not clear if that is melt or RSO]. ISO reports that the country consumes about 1.35 million tons per annum, most of which is imported. There seems to be about 1 million t/a of existing refining capacity, judging by the ISO figures, so why is a further 1.5 million t/a of capacity required?


The current flooding in Thailand, the worst by far for 50 years or more, has hopefully peaked. It is expected to delay the start of crop by a few weeks but crop damage is reported to be ‘limited’.


FSC is planning to cut its factory operations to five days a week rather than face up to cane cutters who just don’t bother coming to work.


There is still no clarity in the race to take over Proserpine, in fact it is probably less clear than it was at the end of September. Cofco’s $120 million offer – which it is making through its recently acquired Tully Sugar – was reported by BDO Corporate Finance to have ‘material legal uncertainty’ but that may have been overtaken by receipt of regulatory approval for the offer.

Sucrogen’s $115 million offer was rejected by 31% of the cooperatives shareholders at the end of October and so failed to pass the 75% barrier. Sucrogen, owned by Singapore’s Wilmar, is reported to have stated that it would leave the race if the vote went against it. What that means to Proserpine’s cash flow [it has a loan from Sucrogen] is unclear too.

Mackay sugar, the third player which previously pulled out, came back in to say that it did still want to merge with Proserpine. However it also reported a profit for 2010 of only $500 000, down from over $44 million in 2009, so it doesn’t look like a particularly attractive option. In fact, Mackay must be more of the next target that a real contender for Proserpine.


If you thought that Cofco’ take-over of Tully and possibly Proserpine is just a small blip on the horizon of the industry : think again. The company chairman [although a state owned enterprise, it seems to be structured on capitalist principles] has said that the company is looking for investments in the U.S., South America, Australia and Russia, albeit across the full spectrum of its interests which include wheat and soybeans as well as sugar.


The beet harvest had hardly started when it stopped again in some areas due to abnormally warm weather. Most of the problems seem to remain on the HR front however with the American Crystal workers still locked out despite renewed discussions between the union and the company. There was better news at Western Sugar where the union decided to keep talking rather than strike at two of the factories. The dispute seems more to do with drug testing [which the union objects to] than with the money offer on the table. A sorry state of affairs.


Most of the mills in Brazil’s Centre South region were shut by the end of October, 30 to 40 days earlier than normal due to the poor crop. The latest output estimate for the region from Datagro was 30.1 million tons. Monsanto is reporting a marked increase in demand for sweet sorgum seeds so that millers can keep their distilleries going.

Meanwhile, Datagro has set up a new enterprise called BENRI with partners Fermentec. BENRI, the Biomass Energy Research Institute, seems to want to be the Standard and Poor’s or Moody’s of the Brazilian sugar industry : it will rate the factories on a scale from AAA to D.


Greek controlled Flour Mills of Nigeria, which is building Lagos’ third sugar refinery, is trying to raise N28 billion [US$ 175 million] in a rights issue. It says that the refinery will be operational in Q2 2012.


The White Nile project in Sudan [or should that be North Sudan?] is finally making some progress, if the statement from the Minister of Industry is to be believed : he is reported to have said that it will produce 250 000 tons of sugar in the next crop year and be up to its full 450 000 t/a capacity in the 2012/13 crop year, only 10 years since the project started.


Unbelievably, COMESA has granted Kenya a further two year extension to its exclusion from that common market’s sugar regime so that it will only fully join in February 2014. The previous extension was meant to be to allow the government to privatise its five remaining factories but it seems to be no further forward with that and, quite frankly, two – if not three – are just not viable concerns and hence not sellable.


SASA is reporting that output from the current crop will be not better than last crop’s which was below 2 million tons for the first time in many years. Their exact figure is 1.909 million tons.

On another note, electrical export from the factories seems to be going nowhere in the country despite the government’s earlier enthusiasm. The focus seems to be more on solar and wind despite both of them having no impact on installed capacity requirements.


The US biotechnology company Amyris seems to appear on these news pages quite regularly. This time it is because it has just signed a deal with the Michelin tyre company to develop an isoprene biosynthesis process. Sugarcane is frequently cited as the obvious starting point for a carbohydrate based chemical industry.


A US company has announced what it calls the ‘Plantrose’ process that can ‘easily’ hydrolyse biomass using supercritical water. It is a two step process which fractionates the C5 and C6 sugars between the two steps. One suspects that the issues might be to do with the effluent side : watch this space. You can read more here.


A company in north Queensland is marketing its flour-like dietary fibre made from bagasse. It reminds one of the sausages available in World War 2 were sawdust was one of the main ingredients.

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