WORLD SUGAR NEWS – JANUARY 2008
The price for raw sugar started the year at 11.04 cents/lb and climbed steadily to 12.75 cents/lb on January 17. Prices then suffered a downward movement, falling to 11.77 cents/lb by January 24 but reversed upwards thereafter to reach a 16-month high at 12.76 cents/lb on January 30. The monthly average was 11.94 cents/lb, 11% higher than the 10.71 cents/lb average in December.
White sugar prices followed a very similar pattern. The ISO White Sugar Price Index started the month at USD 315/tonne (14.29 cents/lb), and closed January at USD 354.60/tonne (16.08 cents/lb), after having reached a 13-month-high on January 17, at USD 355.25/tonne (16.11 cents/lb). The monthly average was as high as USD 338.00/tonne (15.33 cents/lb), or 11% higher than the average of USD 304.27/tonne (13.80 cents/lb) in December.
Datagro sees near balanced sugar market in 2008/09
Brazil's Datagro consultancy sees a small surplus of up to one million tonnes in 2008/09, after a glut of around six million tonnes in 2007/08. According to Datagro, total Brazil sugar cane output was expected to rise by 28-45 million tonnes year-on-year to between 513.5 and 530.5 million tonnes in 2008/09. It is expected that between 57-59 percent of centre-south Brazilian sugar cane would be used to make ethanol in 2008/09, up from 55.6 percent in 2007/08.
Fortis sees 2008/09 deficit at one million tonnes
Fortis Bank says the current sugar glut of around 11 million tonnes may just turn into a deficit of 1 million tonnes by the 2008/09 season. The potential sharp reversal in supply was initially mooted by the International Sugar Organisation last October. The ISO expects a large drop in cane availability in India in the 2008/09 season, causing a fall of 8 million tonnes to 23 million tonnes of sugar. A fall in production of up to 4 million tonnes of sugar is also forecast in the European Union. "Even with an expected increase in output from Australia, Brazil and eastern Europe, the vast surplus is swept aside and a small deficit is conceivable." said the Fortis report. An influx of fund buying into sugar futures contracts with over 1.5 million lots of open interest indicates that "many investors have already decided that the ISO is right and that this season's vast surplus is about to disappear", noted the report.
Fortis noted that in addition to Brazil and India, more countries may increasingly turn to sugar as a means of producing bioethanol, given the record high prices for feedstocks such as maize. "The greatest potential for strongly rising sugar consumption remains its relative price competitiveness compared with fossil fuels for road transport purposes, rather than the propensity for humans to eat more sugar," said the report.
Consumption of sugar for edible purposes is rising at an annual global rate of 2.3% according to ISO's estimates, compared with a projected 20% consumption increase in fuel ethanol consumption in Brazil to 21 billion litres in the April 2008-March 2009 sugar production season, according to Fortis.
EU accompanying measures
§ EU grants Swaziland US$22 million to cushion sugar producers
The European Union has granted Swaziland 15 million euros (US$22 million) to help cushion sugarcane growers after the reform of the EU sugar industry, according to Agence France Presse. "This will go towards the enhancement of the profitability of smallholder sugarcane growers and will contribute to maintain the efficiency of Swaziland's sugar production," said a joint EU and Swazi statement. "The beneficiary farmers will also be assisted to prepare sustainable farm plans." Some 700 sugar industry workers have been laid off in recent months with producers forced to cut costs as a result of the lower prices from Europe. Swaziland's yearly sugar quota to EU markets stands at 120,000 metric tonnes.
§ Guyana receives first tranche of EU sugar funds
The first tranche of GYD1 bln ($5 mln) out of a total European Union grant of $135 mln has been made available to the Guyana government, BBC reported. According to the EU, its support will assist the government in its aims to reform the sugar sector by upgrading the Guyana Sugar Corporation’s (Guysuco) sugar mills, establishing a sugar packaging plant in Enmore, increasing total sugar production and mechanising Guysuco’s field operations to improve profitability. The EU grant will also help to mitigate the potential negative social impacts of the reforms. The funding is part of a perennial sugar program for the period 2006-2010 to support the government’s efforts to improve the competitiveness and viability of the local sugar industry. The second disbursement of $44 mln is planned for 2008.
Guyana 2007/08 sugar production Guyana produced 266,462 metric tonnes of sugar during 2006/07, up 2.6% on the year, and is aiming for 300,000 tonnes during 2007/08. Guysuco said last year it met all of its European Union (EU) and United States bulk sugar commitments, supplying 181,357 and 12,500 tonnes respectively, to those markets. Additionally, about 60,000 tonnes of direct consumption bagged and packaged sugar was exported and sold locally with new markets developed for packaged sugar in St Croix, Suriname, Barbados and St Kitts and for bagged sugar in Australia and New Zealand. It said too that funding from the EU for upgrading the Enmore factory and building a new packaging plant was also secured and the project will get underway this year. This will allow the Corporation to expand its capacity for the production of high quality direct consumption sugars.
Sudan bans sugar imports
Sudan’s Minister of Trade has issued a decree banning the import of sugar, saying that local production was sufficient to meet demand, the Bbc reports. He said only a Presidential decree would allow imports in future and ruled that any permissions granted by the Ministry last year would be revoked as of 1st March 2008 and no new permissions would be granted. He also said that sugar should be sold at no more than 40 or 50 pounds per bag (US$20-25).
Zambia: Libya to invest US$50 million into sugar mill
Zambia's ambassador to Libya says the Libyan Arab African Investment Company (LAAICO) will invest US$50 million to expand Luena Sugar plantation in Luapula Province, according to the Times of Zambia.
The Ministry of Commerce, Trade and Industry on Monday signed the Memorandum of Understanding (MoU) between Zambia and LAAICO on the promotion and protection of investments between the two countries.
ALTERNATIVE SWEETENERS AND OTHER USES OF SUGAR OR SUGARCANE AND BEET
Ethanol exports in calendar year 2007 hit a record high of over 3.5 bln litres, up from 3.4 bln in 2006, according to official figures. The increase was primarily due to sharply higher shipments to the European Union and the CBI while direct exports to the United States almost halved.
Exports to the European Union rose to 1.017 bln litres from 584 mln in 2006. Most of the ethanol went to the Netherlands (809 mln vs. 347 mln litres), followed by Sweden (128 mln vs. 202 mln litres).
Direct exports to the United States fell to 844 mln litres from 1.512 bln while shipments to the CBI countries rose to around 830 mln litres against 466 mln litres in calendar year 2006.
Wholesale domestic ethanol prices in Brazil decreased in January from USD 0.42/l to USD 0.40/l for hydrous and USD 0.48/l to USD 0.45/l for anhydrous alcohol. As reported in the previous edition of the monthly report, confirmation of a greater than expected cane crop as well as ample ending stocks have so far prevented prices from rising during the interharvest period in the Centre- South.
The national Automobile Association Anfavea reported 2.00 mln out of 2.25 mln new otto-cycle vehicles sold in 2007 were flex-fuel vehicles. Thus, the market share of flex-fuel vehicles accounted for 89% of all new sales in 2007, up from 72% in the prior year. The market share of flex-fuel cars, largely running on hydrous ethanol, in the total domestic car fleet rose in 2007 to 26% from a prior 14%.
Mexico plans to encourage the production of biofuels from sugarcane, sugar beets, yucca and sweet sorghum now that a biofuel law has come into effect, according to the country's Agriculture Minister. Under the law, 30-50% of the total fuel ethanol production will be made from cane. The remainder is to be sourced from the other energy crops. By 2012, some 300 thousand ha are to be sown with energy crops. The sugarcane yield is to be increased to 84-85 tonnes per ha by 2012 from a current 74 tonnes.
- European Union
The EU Commission on January 23 published its biofuels sustainability rules which will determine the structure and composition of biofuels usage in the community for the next decades. While the Commission kept its goal of a 10% biofuel usage in all transportation fuels for the year 2020, it specified which combinations of feedstocks and processes for biofuel production which can be regarded as sustainable.
In its rules, the Commission set a default value of 35% of greenhouse gas savings which biofuels must achieve in order to count against the biofuel target. Biofuels producers have until April 2013 to meet these targets. Furthermore, the regulation bans the use of biofuels the feedstocks of which were grown on land which had the status of "recognised high biodiversity value" in or after January 2008.
The Renewable Energy Sources Directive will now go to the Council of Ministers which will ask the European Parliament for advice. Therefore, there is some likelihood that there might be changes to the final text. Industry association eBIO welcomed the proposal but stressed that Europe eventually needs to have sustainability criteria for all crops and uses, not just biofuels.
Total ethanol imports in October 2007 rose to 168.53 mln litres from 60.79 mln in October 2006. This brought cumulative imports in January/October 2007 to 818.76 mln litres from 521.05 mln for the comparable 2006 period. The main origin for denatured ethanol was Brazil (38.00 mln litres vs. 67.98 mln). Major origins for undenatured ethanol were Brazil (365.24 mln vs. 162.61 mln), Pakistan (59.91 mln vs. 35.66 mln) and the United States (45.05 mln vs. 651,600).
WORLD SUGAR NEWS
During February world sugar quotations continued their sharp ascent, buoyed by strong fund investment in commodity futures. The ISA* price for raw sugar started the month at 12.74 cents/lb, climbing steadily to reach 14.55 cents/lb on February 29. The monthly average was 13.51 cents/lb, up 13% from January and the highest monthly quotation since July 2006.
*International Sugar Agreement
New COMESA sugar tariff
Kenya opens its market to 220,000 tonnes of duty-free COMESA sugar during the year starting March 1, with additional sugar subject to 100% duty, according to the local press. COMESA sugar was previously limited to 200,000 tonnes per year with over-quota duty reaching 110%. “The new tariff concessions mark the start of a reform journey agreed with COMESA last year,” said government. The new safeguard quota of 220,000 tonnes is expected to be increased by 40,000 tonnes over the next three year, before being dismantled by 2012— meaning there will be no safeguard. The tariff charged above the safeguard quota would be successively reduced before being fizzled out by the end of the four years.
NIGERIA - Privatised sugar mills still produce below capacity
Production at four newly privatised sugar companies in Nigeria has remained a major challenge as they still utilise their capacity at only 30%, the National Sugar Development Council (NSDC) said. Output has not yet lived up to expectations at the four companies - Savannah Sugar Company, Nigerian Sugar Company, Sunti Sugar Company and Lafiaji Sugar Company - because of the lack of capital needed to rehabilitate the sugar estates, it was added.
First biofuel plant inaugurated
The Nigerian National Petroleum Company (NNPC), has endorsed the country’s first biofuel refinery, saying that the project would create 8,000 direct and 50,000 indirect employment. Feasibility studies have been completed for five bio-ethanol projects at specific location in three states while two feasibility studies on biodiesel are currently on-going. The country is in advanced stages for introducing a 10% biofuel blending policy. Global Biofuel Limited’s integrated ethanol processing plant may eventually expand to seven states and produce up to 1.5 million litres of ethanol per day. It uses sweet sorghum as a feedstock.
ZAMBIA - 2007/08 Sugar production down 8.4% on account of drought
Zambia Sugar recorded an 8.4% drop in output during 2007/08 due to drought experienced in the latter part of 2007. Zambia Sugar, the largest sugar company in the country, produced 233,569 metric tonnes of sugar in the period, compared with 255,000 tonnes in 2006/07, falling below the 270,000 tonnes earlier projected by the company. Zambia Sugar exports nearly half its annual output to regional markets and the European Union. In November the company said it would increase 2007 sugar exports to the E.U. to 30,000 metric tonnes from 20,000 tonnes the previous year. The company also exports sugar to South and Central African markets.
Zambia continues to experience adverse weather patterns which have hurt its agricultural and mining sectors. Zambia Sugar, majority owned by South Africa-based Illovo Sugar Ltd., is currently implementing a 840 billion kwacha (US$228 million) expansion of its plant and farmlands aimed at boosting annual sugar output to 440,000 tonnes by 2010. However, the expansion program has been hampered by the recent flooding.
UK - Tate & Lyle switching all cane sugars to Fairtrade
UK sugar giant Tate & Lyle will switch its entire range of cane sugars to Fairtrade, producing GBP2 million (US$4 million) in premiums for farmers in its first year, reports Sugaronline. The first product to be licensed to carry the FAIRTRADE Mark will be Tate & Lyle Granulated White Cane Sugar, sourced from Belize; Tate & Lyle’s first accredited grower-partner, from whom it has purchased sugar for over 35 years. The switchover took two years of planning. The complete switchover to Fairtrade is expected to be complete by the end of 2009. “Our customers are demonstrating a real desire to buy ethically sourced products like Tate & Lyle's Fairtrade sugar as they want the assurance that growers and their communities in the developing world are getting a fair deal," said a sugar buyer representative.
MEXICO - Sugar exports increase after U.S. refinery blast
Mexico sugar producers said they plan to export 750,000 tonnes of sugar mostly to the United States over the next three months, after a blast destroyed a major U.S. sugar refinery owned by Imperial Sugar in Georgia, which used to produce 900,000 tonnes of sugar a year. The exports take advantage of new trade rules that lifted all barriers to free trade in sweeteners on Jan. 1 between Mexico and the United States, one of the last protected industries under the 1994 North American Free Trade Agreement (NAFTA).
Mexico will have a surplus in the 2007/8 harvest of between 1 million and 1.2 million tonnes, all of which could be potentially exported. U.S. sugar producers, fearing unlimited imports from Mexico, drafted a joint agreement with Mexican producers to control trade in sweeteners between the two countries, but the plan was rejected by both governments. Mexico will produce between 5.4 million and 5.6 million tonnes of sugar in the 2007/8 harvest. The bulk is consumed by the local Mexican market.
CUBA - Ethanol future may be possible after Castro steps down
Fidel Castro’s decision to step down as Cuba’s ruler brings the country one step closer to a democratic transition. Could it also be one step closer to an economic transformation, asks the Wall Street Journal. Before Castro’s 1959 revolution, Cuba was the world’s biggest sugar producer; today, its battered sugar mills and neglected land produce about 10% of what they did. In the meantime, though, sugar has become a real cash crop: while regular sugar sells for around 11 cents a pound, ethanol made from sugarcane can fetch US$2 a gallon.
The academics who try to make sense of Cuba’s economy—and divine its post- Castro future—have spent a lot of time wondering if Cuba could be a baby Brazil, which has become the world’s biggest producer of ethanol by pouring half its sugar crop into the fuel. According to the ASCE - Association for the Study of the Cuban Economy, which has set out to determine how much ethanol Cuba could produce after an exhaustive study of Cuban land use, “the 1 billion gallons [of sugarcane derived ethanol] that Brazil will export in 2007 could have been produced in [the Cuban province of] Camaguey”.
In a best-case scenario, where post-Castro Cuba opened the door to hefty foreign investments to modernize its sugar industry and without any barriers to the US market, Cuba could produce 3.2 billion gallons of ethanol a year, worth around US$7 billion at today’s prices. (Other academics guess it would be closer to 2 billion gallons.) But unlike Brazil, which has a thirsty domestic auto market to feed, Cuba’s relative lack of internal demand would free most of that ethanol for export. Sugarcane biomass, long used to fire distilleries in Cuba, could produce an additional 4 gigawatts of power for the electricity-starved nation.
DOMINICAN REPUBLIC - Two new sugarcane ethanol plants
The recently incorporated company Bio E Group announced the construction, together with other foreign investors, of two ethanol plants in the Dominican Republic. The distilleries come at a cost of US$300 million, and will produce 35 million gallons (13.2 million liters) of ethanol and 30 megawatts of renewable electricity each per year. The feedstock for the biofuel is sugarcane, the residues of which (bagasse) will be used to feed the cogeneration units. The biofuel projects contribute to the revival of the sugar sector, which has been in decline since the 1980s.
After Cuba, the Dominican Republic is the second-largest Caribbean producer of sugarcane, the nation's most important commercial crop. But low world prices since the 1980s have ruined the sector. Many of the state-owned sugar mills, which accounted for half the production, closed down. Production of sugarcane dropped from 8.6 million tons in 1970 to 1.1 million tons in 1983 after which decline set it. In 2006, the country produced a mere 500,000 tons.
The biofuels opportunity is now set to revive the sugar sector and is expected to boost the island state's rural economy, which employs 17 percent of its work force and contributes more to its GDP than any other economic sector, around 11 per cent.