Sugar Industry News : March 2019
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The world price was flat last month, as was the real :
However there seems to be a consensus forming that we are moving into a deficit period and therefore that the price will rise in the medium term.
AUSTRALIA AND BRAZIL LODGE FORMAL WTO COMPLAINT AGAINST INDIA
At the end of last month Australia and Brazil lodged a formal dispute case against India's sugar subsidies with the World Trade Organisation, pointing out that India had introduced about US$ 1 billion of additional subsidies in 2018. The Australian Sugar Milling Council was quoted as saying that it estimated the cost to the Australian industry at 'more than $460 million' although it is not clear whether that is Australian or US dollars [Aus$ = ~0.7 US$].
SUEDZUCKER CONFIRMS CLOSURE OF BROTTEWITZ AND WARBURG
Last month we reported that Suedzucker would be closing factories but no details were available at the time. The company has now confirmed that it will close Brottewitz and Warburg factories, both relatively small factories with origins in the 19th century. Brottewitz is in the east of Germany, beyond Leipzig, and Warburg is in the centre north.
NORDZUCKER BUYS 70% OF MACKAY
Nordzucker has confirmed that it will buy 70% of Mackay Sugar – subject to various conditions. It is paying Aus$ 60 million for that stake, valuing Mackay at only Aus$ 85 million [US$ 60 million]. It will also provide up to Aus$ 60 million in loans to Mackay.
First and foremost the deal is subject to shareholder approval and they are the cane growers that supply the company's factories with the cane. Secondly, the deal is contingent on Mackay selling its Mossman factory, a sale which is already under way provided that the buyer can get various government loans. Finally, it is subject to a debt restructuring of Mackay's existing loans.
AB SUGAR STILL EXPECTS A PROFIT
ABF foods is still expecting a profit 'in line with expectations' according to its guidance issued before the official announcement of its half year results next month. That, of course, does not mean that British Sugar or Ebro, its Spanish company, will make a profit : it could be all down to Illovo's performance.
What the guidance did confirm is that the current campaign's production will be 1.15 million tons [compared to 1.37 million last campaign] and that this year's crop area is expected to be 5 to 10% lower than last year's.
TANZANIA CLOSES THE DOOR AGAIN
Last month we reported that Tanzania had agreed to permit Ugandan sugar imports into the country. Within a month of making the announcement the government in Tanzania has reversed that decision, saying that instead it will devise strategies to boost local production. As it has failed to do that for the past many years and as any useful strategy will take time to yield results it doesn't seem like a clever decision.
IRAN BUYS INDIAN SUGAR
India has an annual trade deficit with Iran in excess of US$ 9 billion due to the amount of oil imported from that country but, because of the sanctions in place, India cannot remit the cash back to Iran. It sits in escrow accounts in India. Iran has therefore contracted with India to buy 150 000 tons of sugar, paying from the escrow – not that the deal will significantly reduce the balance of trade.
ETHANOL STARTS TO CONTRIBUTE IN INDIA
It is reported that ethanol is starting to provide a significant contribution to Indian sugar millers' profits. One analysis shows that ethanol is contributing more than half of the profit before interest and tax for the largest millers even though it is still a relatively small portion of turnover. Of course, that could just be a reflection of how poor profit is in the crystal sugar sector. Hopefully we will see a marked increase in diversion to ethanol in order to reduce the sugar surplus in India.
MAHARASHTRA SERVING SUGAR SEIZURE NOTICES
The government of Maharashtra has started issuing sugar stock confiscation notices to sugar factories that have not paid the farmers at least 25% of cane dues. If it proceeds with the confiscations the millers might be pleased to have the sugar gone in the current market but what will the state do with the sugar it suddenly owns?
INDONESIA SEEKS PALM OIL EXPORTS TO INDIA IN EXCHANGE FOR SUGAR IMPORTS
India is being asked to give Indonesia the same tariff as Malaysia for its palm oil in exchange for opening its market to Indian sugar exports. Whether that is accepted is a moot point : 6.7 million tons of palm oil was exported to India by Indonesia in 2018 – with the higher tariff in place.
TOWER HILL TO BENEFIT FROM IDB LOAN
ASR bought Belize Sugar Industries a few years ago but it was not clear what the intention was as the European regime change would inevitably reduce the price of sugar sold into the EU. In one way it made sense as ASR also owned the refineries in Europe and needed all the raws it could get. That is perhaps not working as the Inter-American Development Bank has announced a US$ 15 million loan to BSI for it to increase its production of higher value-added sugars.