Sugar Industry News : June 2018
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The world price looked as if it was going to continue dropping in May but recovered towards the end of the month and closed exactly where it was two months previously :
Analysts continue to talk about single digit figures although not all. LDC, for instance, sees the 2018/19 surplus dropping to only 2 million tons as various countries and companies react to the low prices.
GLOBAL SUGAR ALLIANCE THREATENS EU, INDIA AND PAKISTAN
The Global Sugar Alliance is a somewhat nebulous organisation which seems driven by Australia and Brazil. It has stated that it is considering taking the EU, India and Pakistan to the WTO for subsidizing their sugar industries. As Brazil heavily subsidises its industry perhaps it should be added to the list?
MAJOR YIELD DROPS PREDICTED AS NEONICOTINOIDS ARE BANNED IN EU
European beet farming organisations are all predicting major yield drops as the EU bans neonicotinoid based insecticides. The French, for instance, are warning of viral yellow leaf with an average 12% yield drop with up to 50% drop in ocean climate zones.
NORDZUCKER FOCUSING ON AVOIDING A LOSS
Further to last month's article about Suedzucker's expected loss, Nordzucker has said that it is focused on avoiding a loss. It is confident that it has strong finances and predicts that other, presumably European, sugar companies will be forced out of business so is looking for takeover opportunities.
KENYA PRIVATISATION BEING BLOCKED BY LOCAL POLITICIANS
The latest problem to hit the much discussed but little activated privatisation of the Kenyan sugar industry is the Council of Governors which wants the factories to be given to the counties in which they stand because the counties would be able to run them efficiently. As Miwani and Muhoroni have a combined debt of US$ 550 million, the counties should be paid to take them away.
KENYA POLLUTES THE OCEAN
Kenya, having seized 400 tons of contraband sugar from Dubai in Mombasa, has duped the sugar into the Indian Ocean. It is good to know that the government is committed to such environmentally friendly policies.
POOR RESULTS FOR TONGAAT HULETT
The operating profits of Tongaat Hulett's sugar division for the year ending March 2018 slumpped by one third despite the company starting to recover from the earlier drought in Natal. It seems that the company blames an inadequate tariff barrier in South Africa allowing imports to compete.
INDIA INCREASES FORECAST YET AGAIN
ISMA has again increased its forecast for the crop, now saying that production will be between 31.5 and 32 million tons. It is clear that the industry is totally out of control.
Added to the existing measures taken by the government [100% tariff barrier, compulsory exports, paying millers debts for them …] there is now talk of creating a 3 million ton strategic stock, i.e. the government buying sugar to take it out of the market. There is also talk of the government setting a minimum price for sugar in the same way that it sets a minimum price for cane. All measures designed to encourage even more production; no wonder the rest of the world's producers are unhappy and 'WTO talk' is on the increase.
ADANI MAY BUY SHREE RENUKA BRAZIL
It is reported that Adani, another India company, may buy the Brazilian factories of Shree Renuka. Adani already has a 50/50 joint venture with Wilmar in the soya sector, a business which is clearly successful. What is not clear is whether it would be Adani or Adani Wilmar that would take over the factories.
THAILAND TAKES OUT 500 000 TONS FROM ITS EXPORTS
Thailand has decided to use 500 000 tons of raws as feedstock for domestic ethanol production instead of exporting it and has hinted that it may do the same for more potential export sugar. Unfortunately for the government it chose to implement its doubly of sugar production capacity just as the world price dropped substantially – in part because of the government's decision. It expects the current year production to be 14.3 million tons.
The government is also reported to be contemplating a change in law which would allow ethanol production from cane juice, bringing it in line with the 'Brazilian' model.
PHILIPPINES CROP FORECAST DOWN 16%
The sugar millers' association in the Philippines is reporting that the current crop looks like producing only 2.1 million tons – more or less in balance with the domestic demand – because of a lack of cutters and excessive rainfall.
LATEST ATTEMPT TO STOP THE US SUGAR PROGRAM FAILS
Every few years some federal lawmakers try to cancel the current US Sugar Program which, they argue, is bad for the economy. The latest such attempt was easily defeated in the House of Representatives [the lower house] last month.
SANTANDER SELLS SUGAR ILLEGALLY
Santander, the sugar company that started up in northern Belize some five years ago, has apparently broken its license agreement – which only allows production for export – by selling its sugar in Belize. The company has reportedly issued an apology following a cease and desist notice from the government but has claimed that it should have a share of the domestic market, something which will be strongly resisted by BSI, the ASR owned factory which currently has a monopoly.
BRAZILIAN TRUCK DRIVERS CAUSE CHAOS
Brazilian truck drivers held a national strike in May that caused chaos across the country and effectively shut down [among others] the sugar industry. Fuel was not available for the agricultural activities and sugar could not be moved out of the factories to the ports. That resulted, in turn, in exports being disrupted. There were signs of the strike coming to an end at the end of the month.
BUNGE LOOKS TO IPO IN BRAZIL
Bunge, the trader that is trying to get out of sugar and has been trying to sell its assets in Brazil for the last four years is now preparing for an IPO for its company Bunge Açúcar & Bionergia SA. The company operates 8 factories with a combined annual capacity of about 20 million tons of cane. Bunge says that it will retain a controlling interest. Some reports say that a prospectus might be issued within a month and others say that it won't happen 'any time soon'. Take your pick.
BRAZILIAN FACTORIES CANCEL EXPORT CONTRACTS
Some factories in Brazil are reported to have cancelled up to 400 or even 500 000 tons of export contracts for the 2018/19 crop.
GILLIAN EGGLESTON APPOINTED HEAD OF AUDUBON
Dr Gillian Eggleston, recently at the USDA Agricultural Research Service in New Orleans, has been appointed head of the Audubon Sugar Institute at LSU, Baton Rouge. She replaces Ben Legendre who passed away a little under a year ago.