Sugar Industry News : June 2019
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The world price stayed below 12¢/lb for most of last month but but managed to close the month almost exactly at that price :
Almost all of the analysts are predicting demand to be above supply in 2019/20 [not that they agree as to by how much!] but it is still not translating into the price.
SÜDZUCKER PUBLISHES 18/19 RESULTS
Last month Südzucker published its results for the year ending February 2019 and it is clear that it is having a torrid time. (17/18 figures are in brackets) Although it made a small operating profit of €27 million (€445 million) at group level, its sugar division posted a loss of €239 million (€139 million profit). Perhaps worse, its forward view is that the sugar division will again post a loss of between €200 to 300 million in 2019/20 and the group profit will be somewhere between break-even and €100 million profit.
FURTHER FACTORY CLOSURES IN FRANCE
Cristal Union is reported to be closing two factories : Toury [capacity 65 000 t/a of sugar], one of a cluster of 3 CU factories just 75 km SSW of Paris, and Bourdon [40 000 t/a] which is in central France and a long way south of [if you will excuse the pun] the 'sweet' zone for beet agriculture.
ROSTOV BEET FACTORY CONTRACT AWARDED
Russia's International Sugar Corporation [ISC] has an impressive name but is, in practice, a private company without any factories. It has been talking about its proposed 12 000 tsd beet factory in Rostov Oblast [Rostov State if you like] since about 2010. [Rostov on Don is the state capital and it is at the far end of the Sea of Azov, that north eastern extension of the Black sea beyond the Crimea.] It is now reported that it has signed a contract with a Chinese contractor to build the factory which will be about 100 km south east of Rostov on Don.
TANZANIA SHELVES THE SUGAR BILL
Last month we reported that President Museveni refused to enact the proposed sugar bill as drafted because the concept of zoning was excluded. It now seems that, in what looks like a classic 'British' compromise [if you exclude Brexit], both sides have agreed to get on with other business until a common position can be reached.
INDIA FINISHES ON 33 MILLION TONS
As we have reported regularly, India's forecasts for the full crop now finished have been all over the place. In late 2018,as the crop started, the forecast plunged 10% to 31.5 million tons in a single step. Now that the crop has finished it seems that was pessimistic by 1.5 million.
What is perhaps more important is what the next crop is going to be. Everybody is talking it down but the figures still vary considerably : 30 million [National Federation of Co-operative Sugar Factories, USDA]; 29 million [Datagro, F.O. Licht]; between 27 and 28 million [Sucden]. The only estimate picked up from ISMA is that the output is 'likely to decline'!
INDIAN EXPORTS EXPECTED TO BE FAR SHORT OF FEDERAL TARGET
The Indian government set a target of exporting 5 million tons of sugar to try and solve the country's sugar glut but by mid-May [so 7½ months into the 28/19 year] only slightly over 2 million tons had been exported and the total contracted was only 2.85 million. Most commentators expect the final export figure to be more or less 3 million tons which would give a year end stock of 14.7 million tons, 56% of annual domestic consumption.
NORDZUCKER / MACKAY DEAL STILL NOT CERTAIN
The Queensland state government has agreed an Aus$ 14 million 'support package' for Mackay Sugar as it tries to make itself an attractive bride for Nordzucker, the potential groom. It is unclear whether the money is a grant, a loan or an equity deal but the government does say it is not 'a bailout'.
Even with the state money, there is no certainty of the Nordzucker purchase being completed : there are still over 100 growers that have not signed a new cane purchase agreement, Mackay has somehow to rid itself of Mossman factory in the state's far north and then there is the shareholder vote [which includes those same over 100 growers].
WILMAR FAILS IN COURT AGAINST QSL
Wilmar, which bought what was CSR and then Sucrogen back in 2010, has been battling QSL in the courts since 2015 because QSL contracted to sell sugar from the 2010 crop which, in the end, did not exist due to poor weather conditions. The trading cost the Australian industry over Aus$ 100 million, 60 million of which was CSR/Sucrogen/Wilmar's responsibility. The case finally got to the Supreme Court where Wilmar's case was dismissed last month.
CUBAN CROP STILL POOR
Despite the early start to crop, this year is expected to close at no more than 1.3 million tons against a budget of 1.5 million. At least that is up on the 2017/18 crop which was 1.1 million tons. AZCUBA reported last month that 15 factories [28%] had met their targets.
BRAZIL'S UNICA EXPECTS CHINA TO ABANDON TARIFFS
China's anti-dumping tariffs expired at the end of May. When they were introduced two years ago Brazil's annual exports to China plunged from a typical 2.5 million tons to less than 1 million. Last month UNICA was reported to state that China 'had agreed' not to renew them and the Brazilian government is said to have withdrawn its WTO case on the issue.
ANOTHER BRAZILIAN FACTORY TO CLOSE
Usina Santa Adélia has announced that it will close its Pioneiros factory after the 2020 crop. There is a difference though : this closure is more a rationalisation with the objective of maintaining the same crush by moving the cane – said to be 2 million tons per annum – to the sister factory at Pereira Barreto, some 30 km away.
BRAZIL TO PUSH ETHANOL EVEN MORE?
Last month we reported that one local consultancy was predicting Brazil's centre-south to allocate only 36% of the crop to crystal sugar. That has now been reinforced by comments from Copersucar predicting '35% or 36%' and another local consultancy is predicting even low allocation at '34% and 34.5%'. Copersucar justifies its prediction by reporting that the return on ethanol is currently running at the equivalent of a 13¢/lb world price for crystal.
CHINA RESISTING SUGAR FROM TRANSGENIC CANE
It is now a year since Brazil started to scale up the planting of CTC's transgenic [GM if you prefer] sugarcane which is resistant to cane borers [the insecticidal Cry1Ab protein from Bacillus thuringiensis has been inserted into the cane DNA]. The Brazilian and US authorities have approved sugar from the cane for human consumption but seems that China is resisting, saying it will take up to 5 years to consider the issue.