Sugar Industry News : August 2019
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Having reached 12.75 ¢/lb by the end of June, the world price dropped to below 11.5 ¢/lb during July but managed to recover to 12.14 ¢/lb by month end :
Traders continue to talk of a deficit for 2019/20 but where is the price recovery?
JULY CONTRACT CLOSES WITH RECORD PHYSICALS
When the July contract closed there were about 2.1 million tons of physical sugar taken, the largest delivery on record. The buyers were Sucden, Alvean, Man, and LDC. One never knows what triggers these events but the suspicion must be that they called the market wrong?
BRAZIL, AUSTRALIA AND GUATEMALA ALL FORMALISE WTO COMPLAINTS
Brazil, Australia and Guatemala, in what looks like a coordinated putsch, have all asked for panels to be set up in their complaints to the World Trade Organisation about India's sugar subsidies. The WTO is considering the applications, India having responded that 'its measures are aimed at preventing exploitation of over 35 million vulnerable low-income, resource-poor farmers and enabling them to have a just and equitable share in economic development'…
SUEDZUCKER'S AGM PAINTED A GLOOMY PICTURE
Suedzucker's shareholders were told at last month's annual meeting that the company faced 'intensely difficult' trading conditions and saw no improvement in the current financial year. What a change from the optimism leading up to the 2017 regime change when it was expected that European producers would storm back on to the world market and make a killing.
CANAL SUGAR LOSING FOCUS
Canal Sugar, Jamal Al-Ghurair's Egyptian beet project, seems to be losing focus [although it is still claiming that it will start up at 50% capacity in February 2021]. Last month it announced out of the blue that it was going to build a 3000 t/h grain receiving facility on the Mediterranean coast not far from Port Said.
ETHIOPIAN PRODUCTION FALLS DRASTICALLY
The latest estimate by the USDA for Ethiopian sugar production in 2019/20 is 240,000 – just 60% of its previous estimate. The report blames bad weather and [of course] mismanagement but holds out hope for the future, saying that the new government intends to privatise all 13 of the country's factories.
KENYAN INDUSTRY FACES A POOR FUTURE
An editorial in one of Kenya's national newspapers last month was highly critical of government policy and revealed some important data. COMESA, the local common market, has stated that Kenya will not benefit from further extensions to its staying outside the sugar regime so in 2020 any COMESA country will be able to export sugar to Kenya on a duty-free basis. The problem is that the domestic cost of production is said to be US$ 870 per ton [say 40 ¢/lb!] whereas Malawi, say, produces sugar for only 40% of that cost.
TONGAAT HULETT PRESSING CHARGES
It is reported that, following last month's suspension of its shares, Tongaat Hulett has already pressed criminal charges against one former executive and that it is now considering whether to do the same to Peter Staude, the former CEO. Staude was paid something like US$ 6.5 million in performance bonuses during the last 10 years, albeit 60% of it in shares.
INDIA REPORTED TO BE CONSIDERING YET MORE SUBSIDIES
Despite the latest moves at the WTO by Brazil and Australia, it is reported that the Indian federal government is considering further subsidies to encourage exports, perhaps covering some of the freight cost and marketing expenses. It is also reported that the government is considering mandating factories to increase buffer storage from the current 3 million tons to 5 million.
INDIA TALKS DOWN 2019/20 PRODUCTION
An annual production in India of just 27 million tons has been suggested by the Western India Sugar Mills Association [presumably Maharashtra and Karnataka]. It is suggesting that production in Maharashtra could fall by over 40% next year, citing last year's drought and this year's monsoon delay. It should be noted that ISMA is still suggesting 28 million tons for 2019/20 but it rarely gets its estimating right.
MSM BEING DIVESTED?
MSM [Malayan Sugar Manufacturing] has three refineries in Malaya, including the new one in Johor close to Singapore. However, it is clearly not doing well as its owner FGV Holdings is said to be trying to sell at least part of MSM to ' international sugar players'. FGV is being more coy, merely noting that it is currently reviewing 'all underperforming and non-performing businesses' [in its portfolio]. When the first phase of Johor came on line the MSM capacity almost doubled and the design allows for a doubling of its capacity in the future.
THAILAND PREDICTS A 1 MILLION TON OUTPUT REDUCTION
The Thai Cane and Sugar Board is predicting an annual production of 13 million tons in 2019/20, down 1 million tons from the 2018/19 output. Part of the reason is drought conditions but there is also the reduction in the cane price caused by a strengthening baht in a scenario where 80% of the production is exported.
ANGKOR SUGAR CLASS ACTION REJECTED
Further to our previous news item, the court in Bangkok rejected the Cambodian farmers' class action against Mitr Phol. The farmers are saying that they will appeal the decision and, if that fails, will bring 700 individual claims against the company.
NORDZUCKER / MACKAY DEAL GOING AHEAD
At the very end of July Mackay Sugar announced [with much relief all-round in Queensland] that 75% of its shareholders – the growers – had voted in favour of the Nordzucker takeover which will therefore proceed. After completion, Nordzucker will have paid Aus$ 60 million [US$ 42.5 million] for 70% of the company, the remaining 30% staying with the growers. That values the company at just US$ 61 million. Interestingly, Canegrowers [the Australian representative body for all cane growers] persists in calling the deal a 'partnership' not a takeover …
BUNGE FORMS JV WITH BP IN BRAZIL
Bunge has formed a joint venture with the oil giant BP putting its Brazilian sugar assets into 'BP Bunge Bioenergia'. The new company will have 11 factories with a combined annual crushing capacity of 32 million tons, two thirds from Bunge assets. A balancing cash payment of US$ 775 million will be paid to Bunge by BP.
LOW GI SUGAR PLANT TO BE BUILT IN OMAN?
It is reported that an Indian company called Petiva will build a low GI sugar plant in Salalah Free Zone at a cost of US$ 200 million. Petiva market two such products : one called 'Honeytose' which seems to be allulose [aka D-psicose] and the other called 'Nectarose' which may or may not be trehalulose. Allulose is a linear epimer of fructose produced by enzymic modification of fructose. It is 70% as sweet as fructose but is not absorbed by the human body.