Sugar Industry News : May 2019
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The world price touched 13¢/lb last month but closed down across the month :
All of the talk is of better times but it is not translating into the price.
AB SUGAR HALF YEAR PROFIT ONLY £1 MILLION
ABF, owners of AB Sugar [British Sugar, Azucarera Ebro, Illovo and some beet operations in China], last month confirmed that the AB Sugar profit in the first half year was only £1 million compared to £106 million the previous year. That is still better than the losses being reported elsewhere in Europe and the company believes that all of the decline has been taken in the first half. In its statement it was clear that Illovo is being recognised as more important to the group with a strong push on drip irrigation where appropriate.
TEREOS STRUGGLING WITH ITS DEBT
It seems that the banks are very wary of Tereos' performance and not prepared to participate in a current round of debt financing. It is reported that the problems, at least in part, are a result of the firing of the CFO that we reported last month.
RUSSIAN INDUSTRY NO LONGER EXPANDING
Several commentators were quoted last month with respect to the Russian industry, the second largest beet sugar producer in the world after the EU, all saying that is no longer expanding and intimating that it may have to contract. The country reached self-sufficiency some time back and was exporting until the world price dropped. One Russian [private sector] institute expects the year-end stocks to increase for the fifth year running this year and it all expects exports to drop from about 500 000 tons to just 137 000. It points to the fact that even 'tied' countries like Uzbekistan and Azerbaijan find it cheaper to buy on the world market.
CONTRACTS FOR CANAL SUGAR SIGNED
Following last month's news that Canal Sugar had secured initial funding, it has now been reported that the company has signed contracts worth a total of US$ 290 million to start the project. There are three contracts noted : the irrigation system [axial overhead, not drip apparently] from a Saudi company, the factory from a Chinese company Sinoma CDI [is this the Chengdu Design Institute???] and a local contract to connect the site to the electrical grid.
NILE SUGAR CHANGING HANDS
Orascom seems to have reached agreement to buy out the other shareholders of Nile Sugar at a 'fair price' determined by an independent consultancy. The company was valued at US$ 217 million. What is strange is that Orascom describes itself as telecoms and technology company : sugar does not sit comfortably with such a profile.
UGANDAN PRESIDENT REJECTS SUGAR BILL
President Museveni has refused to enact the parliamentary sugar act passed six months ago, stating that zoning of the industry was essential for its health. The government wants at least 25 km between factories with growers obliged to sell to the nearest factory. Whilst the rest of the act seems to have been accepted by parliament, the MPs are reported to have voted overwhelmingly against that obligation. The act has been referred back to parliament.
INDIAN OUTPUT PREDICTED TO FALL FURTHER
Based on technical factors most forecasts are predicting a further fall in Indian output in 2019/20 and beyond [there is talk of 27 to 28 million tons in 2020/21]. Part of the problem is the expected poor monsoon as another El Niño event develops in the Pacific and another part is the switch to ethanol from juice and early molasses. However, there is also the continuing disillusionment of the farmers who will switch out of cane if the opportunity arises.
TAMIL NADU INDUSTRY IN CRISIS
The industry in Tamil Nadu is reported to be in serious difficulty with a crop of only one quarter of the 2011/12 crop as drought continues to affect the south of the sub-continent. There is also the question of the federal imposed 'Fair and Remunerative Price'. The factories are said to owe somewhere between US$ 650 to 720 million to the banks and another 70 million to the farmers and to be desperately trying to restructure debt.
MACKAY BONDHOLDERS TO TAKE A HAIRCUT
As part of the Nordzucker take-over of Mackay Sugar, holders of Mackay's corporate bonds have agreed in principle to accept 50% of face value rather than risk losing all if they caused the collapse of the takeover. However there is still the need for the company's banks to accept a restructuring and that may delay the completion of the deal.
BRAZIL MARCH EXPORTS ARE LOW
Brazil's sugar exports for March – the end of that country's crop year – were, at 955 000 tons, the lowest March figures for seven years and 400 000 lower than the comparable 2018 figure. With a much reduced crystal sugar production in the 2018/19 year it seems that stocks are nearly exhausted and the new crop os getting off to a slow start.
BRAZIL'S CENTRE-SOUTH TO PRODUCE ~27 MILLION TONS?
With the crop just starting [and slowly at that], one local Brazilian consultancy is predicting the centre-south to allocate only 36% of the crop to crystal sugar, only just above the previous crop's record low of 35%. That would imply output of about 27 million tons, quite a bit below the ~30 million tons that is generally expected.
GERMANY WARNS ABOUT HEATING SUCRALOSE
One of the most important claims for sucralose is that it is heat stable so can be used in cooking "low calorie" food. However, the Bundesinstitut für Risikobewertung [BfR] has now issued a warning that heating sucralose above 120 °C 'might' produce 'harmful compounds, some with carcinogenic potential'. It does state that 'there are currently insufficient data to draw final conclusions'. The full opinion is available online.