Sugar Industry News : October 2018
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Despite the Indian governments latest intervention [see below], the world price ended September a full 1 ¢/lb up over the month :
Perhaps the traders don't think the WTO will allow the intervention [or they don't think anyone will buy the Indian sugar].
TEREOS REDUCES PLANTING BY 5%
Following last month's article on a sharp drop in profits, Tereos has announced that its French members [it is a cooperative] will be reducing sowing by 5% next spring. The organisation cites "market conditions, low prices, high stocks and hefty  supplies …"
GHANA LOOKS FOR AN INVESTOR FOR KOMENDA
President Akufo-Addo of Ghana has stated that his government is looking for a strategic investor for the Komenda Sugar factory. The 1250 tcd factory was commissioned some two years ago under the previous government but shut down again a few weeks later due, it was said, to a lack of cane. This is disputed by the local farmers who claim to have 2000 acres under cane [and that cane is being sold at a loss to local distillers].
KENYA POWER CUTS OFF MUMIAS
Reading the headline, one might think that there was a problem with the power purchase agreement and the utility had stopped accepting export electricity from Mumias. Unfortunately, the truth is that the situation is so dire at Mumias that the utility has cut the supply to the factory with Mumias reportedly owing it US$ 20 million for electricity supplied.
TANZANIA AND UGANDA REACH EXPORT AGREEMENT
Following last month's article, Tanzania has agreed to remove the 25% tariff imposed on Ugandan sugar in August provided that the sugar is truly from Uganda and that Tanzania is in deficit. The latter is unlikely to be a problem but the former … who knows?
FOUNDATION STONE LAID FOR SOHAR REFINERY
It is reported that the foundation stone of the proposed new refinery in Oman's Sohar Port has been laid. The refinery has been a long time coming and in many instances the laying of a project's foundation stone is just another delaying tactic. Time will tell. The refinery is said to be costing $350 million (!) with a capacity of 900 000 t/a. Maybe the fuel cost will be heavily subsidised.
INDIA ANNOUNCES $750 MILLION OF STATE AID!
In September the Indian federal government announced various measures to support its sugar industry. The total cost is reported to be INR 55.38 billion [US$ 750 million]. The measures include a minimum export quota of 5 million tons, an additional $1.14 per ton of cane to the farmers [they already get $0.75/t] and transport subsidies for the exports.
Brazil and Australia have already approached the WTO as a result of the announcement and others will surely follow [including, perhaps, even the EU].
The problems that the government will face include persuading the world market to accept Indian sugar [which is perceived, rightly or wrongly, as low quality] and persuading the millers to accept exports at low world prices. At least the rupee continues to fall in value [it is heading to 75/$] which should help with the latter problem.
Of course, this announcement has nothing to do with the fact that India will hold a general election next May.
CODE OF CONDUCT REVIEW UNDER WAY
The Australian federal government has been conducting a review of the 'Sugar Code of Conduct' that was introduced only 18 months ago. It is unclear why there needs to be a review but it must surely be political : the cane growers want it to stay and the millers want it to go. The state government in Queensland is also opposed to it [but the federal government is clearly not and there has not been a change of ruling party, just of Prime Ministers].
The declared purpose of the review is "to determine the effectiveness of the existing Code and whether amendments are required" and the objective is to deliver a final report by the end of this year.
BAGASSE PLATES PRODUCTION STARTS UP IN FLORIDA
A company called Tellus, jointly owned by Florida Crystals and the Florida Cooperative, has started commissioning its bagasse based disposable plate production plant at the Belle Glade factory. It is presumably more profitable than transporting the bagasse to Okeelanta to support the electrical export station.
LDC SELLS A BIOSEV FACTORY FOR A SONG
Biosev, 90% owned by LDC, has sold one of its factories in Brazil's north-east to an unnamed investment fund. The factory, Estivas, has an annual capacity of 1.8 million tons but the price paid was only $50 million, about $28 per ton of capacity. Biosev has stated that the money will be used to pay down its debts which stand at a staggering $1.6 billion.
INVESTMENT FUND CASTLELAKE LOOKING AT BRAZILIAN SUGAR ASSETS
Turnaround specialist Castlelake [offices in Minneapolis, London, Singapore and Luxembourg with investments of over $13 billion] is reported to be seriously looking at the industry in Brazil and its distressed companies. It is said to be looking at five potential targets and in talks with two of those. Maybe it was the mystery buyer of LDC's Estivas factory?