Sugar Industry News : July 2018
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The world price bounced around back below 12 ¢/lb :
If Brazil's center-south really does drop 8 million tons [see below] then it is difficult to see how it can drop much more.
TEREOS IS LOOKING FOR A PARTNER
In a move clearly signalling that the EU regime change is not the expected bed of roses, the French cooperative Tereos has announced that it is considering offering part of its equity to an international partner. It is understood that the partner, if found, is unlikely to be French and equally unlikely to be another cooperative.
CRISTAL UNION CANCELS MINIMUM BEET PRICE
The French cooperative Cristal Union has cancelled its €27 per ton minimum beet price which it had promised its farmers for the 2017, 18 and 19 campaigns. [For comparison, Terreos is contracted at €25/t for 2018.]
MUMIAS SUSPENDS CEO
Mumias has suspended its CEO, Nashon Aseka, just 12 months after he took over from Errol Johnston. The issue seems to be that the company entered into ' doubtful transactions' without following normal procedures and/or without the necessary approvals.
SOUTH AFRICAN INDUSTRY DEMANDS HIGHER IMPORT TARIFFS
SASA and the farmers marched on Pretoria last month to demand higher import tariffs as low world prices led to increased imports. SASA has calculated that imports at current levels will result in the closure of three of the country's 14 mills. As would be expected from any politician, the government acknowledged the problem and claimed to be holding meetings to resolve it.
INDIA INTRODUCES 3 MILLION TON STRATEGIC STOCK
Following our suggestion in last month's news that the Indian federal government would introduce a 3 million ton strategic stockpile, it did exactly that on June 6, stating that it would initially be for a one year period.
INDIA INTRODUCES A MINIMUM SELLING PRICE FOR SUGAR
Instead of reducing its interference in the sugar sector, India's federal government has introduced a new concept whereby nobody can sell sugar for less than the minimum price that it sets. It has set a starting price of INR 29 per kg [19.2 ¢/lb]. It has said that it will take into account the price that it sets for buying cane in setting the minimum selling price but won't necessarily help as each state sets the cane buying price and that can be higher than the federal price.
INDIA EXPECTING ACCESS TO CHINA'S SUGAR MARKET
Following Indian PM Modi's visit to China in May, both the federal government and ISMA are quietly noting that they expect to get approval to export 1.5 million tons of Indian raws to China starting as soon as this September. China has not yet made any announcement so we have to wait for the details of any deal.
INDIA INCREASES ETHANOL INCENTIVES
At the end of June, in a move seen as trying to reduce crystal sugar production, the federal government in India increased the price of C molasses ethanol and introduced a price for B molasses ethanol. The former was a 7% increase and the latter was set at an 8.7% premium. ISMA is of the view that the government is set on achieving E10 even though it has not yet achieved E5 [it is currently at about E3.6].
UP MILLERS REFUSE TO CRUSH NEXT CROP
The millers in Uttar Pradesh have told the state that 'circumstances suggest that we have no ability to run' for the 2018/19 crop. As a result they are refusing to participate in filed surveys and other activities in the lead-up to the crop. That happened before the federal announcement of a minimum selling price so it is unclear how serious the threat is.
CUBAN PRODUCTION COLLAPSES AGAIN
It seems that the Cuban 2018 crop, now finished, was no better than the bad years and the prognosis for 2019 is no better. Azcuba is refusing to provide any figures but traders are talking of cancelled exports and production no better than the bad years from 2005 onwards when production was not much more than 1 million tons. The island experienced heavy rains and consequent flooding in late May so re-planting for 2019 is reported to be 'well behind schedule'.
COPERSUCA SEES MUCH REDUCED BRAZILIAN SUGAR PRODUCTION
Copersuca, the commercialised Brazilian cooperative, is reported to be predicting this year's total crystal sugar production in the center-south to be only 28 million tons, an astounding 8 million tons down on the previous year. Part of the reduction comes from reduced cane production [555 million tons compared to 596 million] and some from increased ethanol production.
BUNGE PUTS BRAZILIAN IPO ON HOLD
Bunge seems to be suffering from HCS [think decapitated poultry]. It announced in mid-June that it was putting the only just announced proposed IPO of the Brazilian sugar business 'on hold' citing 'current market conditions'. As the market conditions have not really changed it is difficult to see why it announced the IPO in the first place.
On another front, the company seems to be going ahead with its plans to close its trading desk with the Brazilian part of the company talking to other traders about the 300 000 tons of production that would normally be exported through its own traders. At the same time it announced that it was expecting over 60% of its crop to be used for ethanol production.