Sugar Industry News : November 2014
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WORLD PRICE
The world price drifted down from about 17 to 16 ¢/lb through October, perhaps recovering from the excitement of September. Only ED&F Man seemed to call it right, warning that the bounce off of the 13.5 ¢/lb of September would not be sustained.
BUNGE BOUGHT 528 600 TONS
The rumours about a coup towards the end of last month turned out to be correct : Bunge bought over half a million tons of sugar at the bottom of the market. The deal was apparently worth $180 million with the sugar coming from Brazil and Central America.
In addition, we understand that Al Kaleej bought a lot of Thai raws in the same period but there is no ready information as to how much was purchased.
KENYA REPORT
Kenya has announced that it is going ahead with a quality based cane payment system. Let’s hope that the growers accept it without complaint as it should result in a better industry for all – provided that the growers respond to the feedback they will get.
Last month we reported on the cancellation of Butali Sugar’s licence by the Court of Appeal. Although that was true, apparently the court also instructed the ministry to hear a new application by Butali and to also hear West Kenya Sugar in opposition to the application as its factory is only 10 km from the proposed Butali factory.
HIPPO VALLEY ETHANOL
Hippo is talking of starting ethanol production again, this time for fuel ethanol, not potable. It is unclear what that really means as it stopped in 1981 when the Triangle fuel ethanol plant came on stream because it could make more money by selling its molasses to Triangle. If Triangle loses the Hippo molasses, what are the implications? After all, both factories are controlled by Tongaat Hulett.
SOUTH AFRICAN DROUGHT
Natal is experiencing drought conditions with most of the mills expected to finish the crop early due to a lack of cane. Even the irrigated cane is expected to suffer as the local water authority is reporting ‘serious’ problems.
MADAGASCAR REPORT
It seems that Complan, the Chinese company which now owns most of the Jamaican industry, specialises in islands : it also runs, albeit on a lease basis, the Malagasy industry. Apparently it has been doing so since 1997 but its view of production seems somewhat at odds with that provided by the government to ISO : it claims that production was 98 000 tons in 2013 while ISO reports 77 000 tons so one has to doubt its forecast of 106 000 for 2014. The island’s demand is reported to be about 155 000.
INDIA BANKRUPTCY?
Mawana Sugars, one of India’s largest producers [it has three factories in UP with a total crush capacity close to 30 000 tcd] has defaulted on a $40 million loan and continues to lose about $0.1 per kg of sugar.
Part of the problem was the UP government’s setting of the cane price at about $46.67 per ton for the last crop when the federal government figure [considered fair by the federal government] was $35 per ton. Now you can start to understand why the UP millers are saying they will not crush in the crop which is supposed to be starting now.
In Tamil Nadu the millers are just refusing to pay that state’s additional $5 per ton on top of the federal government figure. The farmers there are threatening to just plough out to a different crop. In Punjab state the millers are objecting to the state imposing VAT on their cane purchases, something which doesn’t happen elsewhere.
All in all, the signs are that India is about to go into another production crash, no matter what the weather conditions might be.
BANGLADESH EXPORT CANCELLED
Bangladesh was talking about exporting to the EU again last month, asking for tenders for 25 000 tons of domestic production. In the end it withdrew the tender due to lack of support [the only offer received was $295/t from ED&F Man] but the concept is, quite frankly, ludicrous as the country produces only 110 000 tons per annum according to ISO and has to import about 1.6 million tons to satisfy the demand of about 1.7 million tons.
INDONESIA REPORT
Indonesia’s new president, Joko Widodo, is already signalling possible change in the industry, having had a meeting with cane farmers in Java last month. His talk is probably a pipe dream though as he is talking of stopping imports when his country has a demand, according to ISO, of 5.8 million tons and a production of only 2.5 million.
CHINA REPORT
Some interesting data was published by the China Sugar Association last month. The country was reported to have produced 13.3 million tons in the 2013/14 year but sales were only 10.2 million tons by the end of August with only one month to run. That implies that the Chinese still do not have a sweet tooth with a per capita consumption of only 10 kg/a. It is still better than the 10kg/a figure from 10 years ago though.
AUSTRALIAN EXPORTS ENQUIRY
The federal government in Australia is holding an enquiry into whether the Queensland millers should be forced to sell their export production through QSL. On the one side are Wilmar, Maryborough and Tully who have all declared that they will sell their own sugar and on the other side are Canegrowers. Wilmar is arguing that any enforcement would amount to re-regulation of the industry and hence be a negative step.
MACKAY PIPE DREAM
Bob Katter is a politician with dreams. He wants to resurrect the Upper Burdekin River dam project and create 120 000 ha of additional cane land near to Mackay for a major ethanol project. He rather lightly steps over the question of what such a project would cost however : it has to be at least $500 million, if not a billion.
SECOND US MEXICO TRADE WAR
The two governments reportedly reached an agreement on October 27 to avoid an all-out ‘war’ in this ongoing dispute. Mexico has agreed not to sell raw sugar into the USA for less than 20.75¢/lb nor refined sugar for less than 23.75¢/lb and there is an annual cap on the quantity that can be sold too.
BRAZIL REPORT
Datagro, the well-known Brazilian consultancy, is now predicting a centre-south crop of only 550 million tons of cane, noting that the current drought is the worst ‘in at least 100 years’. Mills are expected to close early [which is probably better than having millions of tons of standing cane].
YET ANOTHER SANTOS FIRE
Don’t the Brazilians learn? There was yet another fire in a Santos sugar terminal last month, more or less exactly 12 months after the major fire there at the Copersucar facility. This one was at a facility owned jointly by Cargill and Louis Dreyfus. The particular store only holds 100 000 tons and the fire did not spread to other facilities. The market is now so used to fires in Brazil [this was the fourth in little more than a year] that the world price didn’t seem to react at all to the news.
As a result of all the fires there is talk of Brazil damping its sugar and/or producing a larger crystal sugar to reduce the fire risk. It will be interesting to see how this is received by the customers.