Sugar Industry News : December 2017
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WORLD PRICE
The world price went over 15 ¢/lb last month but had dropped back to just below that towards the month end :
The consensus seems to be that it will continue to hover below, particularly with everyone seeing the global balance favouring a low price [see below].
USDA PREDICTS GLOBAL PRODUCTION AND CONSUMPTION RECORDS
Last month's biannual USDA report on the industry is predicting both record global production – 185 million tons – and record global consumption – 174 million tons – in the current year. The year on year increase in production, at 13.5 million tons, is probably a record too. It attributes the increase to record production in Brazil, output recovery in India and Thailand, the EU regime change and area expansion in China.
EU EXPECTS BEET YIELDS ABOVE 90 T/HA
France has increased its beet forecast by 1.5% as it sees the beet yields reaching 90 t/ha. In Holland, Suker Unie is reporting beet yields of 91 t/ha. Sugarbeet is clearly showing the advantage of a short life cycle when it comes to variety development when compared to the long life cycle of sugarcane.
KENYAN PRIVATISATION STARTS AGAIN?
The High Court in Nairobi has thrown out a case which has stalled the privatisation of the five public sector factories for the last eighteen months. The case had been brought by two politicians from Western Kenya where the factories are located. It seems to have hinged on some legal technicalities but, frankly, the whole privatisation is probably a technicality as who is going to want to pay for those five businesses?
Meanwhile, Mumias – the one factory that was privatised but more or less collapsed financially – has started operations again after a 7 month break in production [not just an off-crop stop].
INDIA SURVIVES THE PINCH
Reports from India are indicating that the country did not literally run out of sugar at the end of October although it will be interesting to see the closing balance figure when it is published. Once Diwali was out of the way the factories did indeed start up somewhat earlier than normal so about 1.4 million tons had been produced by mid-November.
ISMA PREDICTING 25.1 MILLION TONS
The Indian Sugar Mills’ Association is predicting 25.1 million tons for the current crop with UP contributing 10 million to the total. This crop is expected to be poor in Tamil Nadu, the state which propped up the 2016/17 production with close to half of the dismal 20.3 million ton total. This crop it is expected to only achieve 6 million tons due to the previous southern drought.
SHREE RENUKA TROUBLES CONTINUE
Last month Shree Renuka reported a loss equivalent to US$ 18.5 million for the quarter ending September and tried to bolster shareholders by saying that it expected the deal whereby Wilmar will increase its shareholding to be concluded in December or January. However, we hear that Wilmar itself is not so happy with its sugar division performance so will the deal actually happen? In general, commodity traders do not make good owners of physical assets.
QUEENSLAND ELECTION NOT GOOD FOR CANEGROWERS
Queensland went to the polls in the second half of November. The widely scattered nature of the population means that the results will only be formally declared weeks later but preliminary assessments indicate that the Labor party will have an outright majority. That is good for the millers but not the growers [or QSL] as Labor was against the imposition of the arrangement whereby growers could still decide who marketed the sugar produced from the cane that they had sold to the factories.
MACKAY SUGAR CHAIRMAN REPLACED
Regular readers will be aware of the debt problems at Mackay Sugar. Whether the situation has improved or worsened is not certain but in mid-November the Chairman and Deputy Chairman were both replaced without notice. The new Chairman is Mark Day who has returned to Australia after three years or so in Brazil for Bunge.
THE US SUGAR REGIME UNDER INTERNAL ATTACK AGAIN
It seems to happen every four year cycle : a group from both houses of Congress and from across the political spectrum is introducing a 'Sugar Policy Modernization Act' with the objectives of :
- lifting restrictions on domestic production and sales;
- reduce taxpayer liability when sugar processors do not pay back their USDA loans;
- ensuring that domestic demand is considered when administering the regime;
- bringing market forces into the market, phasing out supply-management policies;
CHINESE OWNER CASTS DOUBTS ON JAMAICAN INDUSTRY
In an unusually open interview last month, the Chinese deputy CEO of PCSC, the company that purchased Frome, Monymusk and Bernard Lodge some 7 years ago, is reported to have said that it will be very difficult for local sugar to compete globally in the future. With the cost of production more than twice the world price, that is a serious understatement.
CUBA'S HARVEST HAS STARTED
Reuters ran an interesting article at the end of November on the prospects for the recently started Cuban 2017/8 crop. It notes that Azcuba is not prepared to estimate the production after such terrible weather but the Reuters' assessment is that it will be somewhere between that of the two previous crops. If Cuba achieves that it will have done well.
MORE FACTORIES MOTHBALLED IN BRAZIL
Both Biosev [Louis Dreyfus] and Raizen [Cosan and Shell] announced the suspension of operations at factories last month. Biosev will suspend Maracaju Mato Grosso do Sul indefinitely, the cane going to its Rio Brilhante and Passatempo factories. Raizen will suspend Dois Córregos and Tamoio, both in Sao Paulo within a 100 km of Piracicaba, initially for two years. Again the cane will go to Raizen factories close to the two.