Sugar Industry News : December 2014


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The world price has continued to hover around the bottom in the 15 to 16 ¢/lb range but with people trying to talk it up, referring to Brazil and Thailand both suffering adverse weather and China cutting its centrally set cane purchase price to farmers so that they are leaving cane agriculture. Certainly ISO is predicting only a 473 000 ton surplus in the current sugar year – less than 0.3% surplus on the 164 million ton world consumption.


Tereos, the French sugar cooperative [think Begin Say as was], has poached a senior trader from Louis Dreyfus Commodities and set up its own trading company with the stated aim of taking 15% of the global market – perhaps 1.5 million tons. The company will be based in Geneva which makes Geneva start to look more important than London in terms of sugar trade.


The Nigerian government is claiming that it is on track to be self-sufficient by 2024 which would require 1.8 million tons of sugar production compared to the current production of 20 to 30 000 tons. As most of the investment is supposed to come from the country’s three refiners and as a refinery cannot compete with a factory using almost free [bagasse] fuel one has to doubt whether the investment will really happen.


Zimbabwe is to apply a 10% duty on all sugar imports, whether raw or refined, from January 2015. We also note that Tongaat Hullett is ceding 6 000 ha of its land in the lowveld to the government for cane agriculture. TH owns both sugar factories there and is clearing the land as part of the deal. What is not clear is whether there is a quid pro quo in the two announcements.


Mauritius suffered from an industry wide strike in the second half of November with the workers demanding a 40% increase in pay and a 100% increase in benefits and the companies offering 11% over 4 years. The strike itself ended after 8 days with an agreed increase of 13% over 4 years (!) but the bickering was still continuing into December with the union demanding that the workers be paid for the time they were on strike.


Some interesting data about its bagasse fired electricity export incentive scheme was provided last month by the government of Pakistan. The scheme plans to create 3 GW of capacity in the 87 cane factories that operate in the country. To date, seven factories have operational units with an installed capacity of about 140 MW and three more have applied for licences which would take it to 230 installed, say 110 MW of export. The remaining mills will have to do better : at an average 23 MW installed all 87 factories would only reach 2 GW installed.

The government is offering PKR 10.5 per unit [US 10.5 ¢ per unit] as what it calls an incentive to ‘fast track’ 1.5 GW of installed capacity but that is not a particularly attractive rate. Its problem is that hydroelectric costs it only PKR 2.5 per unit but that is not during the dry season when the cane is crushed. Electricity based on furnace oil costs it PKR 14 and that is what it should be comparing.


India has told the WTO that it will refrain from subsidising any more sugar exports, the September 2014 being the last such subsidy.

Just as India made its announcement, the Pakistan millers association was pressing its government to introduce similar incentives ‘because India was extending its incentive scheme’.


The crop has got off to a slow start in India with a lot of millers refusing to start with the current price structure which favours growers while millers claim they make a loss. Despite the threats not to start crushing, some of the factory owners in UP had started crushing by mid-November, albeit only 17% of them and even then 7 of the 17 percent were cooperatives.

Stocks were reported to be 7.5 million tons at the end of the last sugar year [September 30] and the best estimate of consumption we have is 23 million tons so stocks were equivalent to just 17 week’s consumption. [There are some who report 26 million tons!] The millers are still hoping for 1 to 1.5 million tons of exports in the year just started but that would require the government to continue export incentives and it is saying that it will not [see above].


The Indonesian Food and Beverage Industries Association is playing up the supply problems of the refiners as a result of the 7% reduction in raws imports imposed by the government. It is saying that several refineries have had to close and the others have dwindling stocks of raws. What is not described is the pleasure being experienced by local cane growers as prices are forced up. This is all part of the new President’s plan to be self-sufficient within 5 years – which would put the refiners out of business if only it were possible.


The US industry has decided that the ‘peace treaty’ agreed in principle in October is not as good as they hoped. The problem seems to be the definition of refined sugar which has been set at 99.9 °Pol [compare that to Japan’s 97 °C] which would allow estandar sugar, for example, to come in without restriction.

Even the Australian industry is not happy with the deal because it apparently includes a clause which gives Mexico first right of refusal to supply any shortfalls in US import supplies in addition to the allowed sugar.


In the recent past Jamaica has given permission to industrial users to import their own white sugar, only to find that sugar making its way into the retail trade – not a great surprise. The government has therefore reinstated its SIA as the sole importer of all sugar.


Following on from our news item in February this year, the Chinese owners of Frome and Moneymusk are now saying that they have spent $160 million refurbishing the estates since then and will be spending ‘at least’ another $100 million. They have hinted that at least $120 million was spent at Frome, mainly in the factory and are claiming that efficiency will be much improved in the 2015 crop. Time will tell.