Bad weather affects SA’s sugar exports

According to South African Sugar Association executive director Trix Trikam, exports are likely to amount to about 900 000 tonnes for the 12-month period, which compares with long term average exports of 1,1 million tonnes a year. A fairly good estimate of annual exports can be made at this time of year because all the export sugar has been milled.

About one third of the 900 000 tonnes is likely to consist of bagged and refined sugar exports from individual millers, while the association exports bulk raw sugar on behalf of millers and cane growers. Sugar is sold overseas only once local demand is satisfied. SA’s biggest sugar producers are Illovo Sugar, Tongaat-Hulett and TSB Sugar.

The association has forecast a sugar cane crop of 2,3-million tons at the end of March, which is lower than the previous year by about 750 000 tons due to excess rainfall and cloudy weather that has had an impact on production and sucrose levels in the cane.

About half of SA’s bulk sugar exports are sold to refineries in Far Eastern countries, including China, Japan and Korea, while the other half is sold to Middle and Near Eastern countries such as Saudi Arabia, Bangladesh, Indonesia and Iran. A relatively small amount, about 25000 tons, is exported to the US under that country’s quota regime.

Most of it is shipped from the sugar terminal in the port of Durban and about 100000 tons, mainly from sugar mills in Mpumalanga, is expected to be exported from Maputo because of the lower transport costs.

The sugar terminal at Maputo — SA, Swaziland, Zimbabwe and Mozambique each own 25% of the facility in terms of a unique initiative of the Southern African Development Community — was recently expanded, with a fourth silo being added at a cost of $10m.

About 140 countries produce sugar, but few of those represent large exporters and most produce to satisfy local demand. The world’s sugar market is dominated by Brazil, which exports about 15-million tons a year, followed by Australia with about 3,5-million tons.

Although the world sugar price fluctuates according to demand – local exporters received close to the 12-month average to January 31 of $0,14 a pound — the supply to the market is artificially supported in northern hemisphere countries by export and trade support subsidies, as well as high tariffs.

Significantly, the New York Board of Trade launched a “soft commodity” electronic trading platform on February 2 that has extended international sugar trading to eight hours a day from three hours. This may eventually be extended to 22 hours.

Trikam says this market should introduce speculators and bring more volatility to the sugar price, even though it was already the most volatile soft commodity last year. The EU recently decided to stop exporting about 5-million tons a year, and new refining capacity is on the drawing boards in the Middle East and Asia.

Over the past five years about 5-million tons of additional refining capacity was introduced in these regions, while another 7-million tons of capacity is expected to be built in the next five years. This compares with the 15 years to 1995, when there was no increase in global sugar refining capacity, Trikam says.

“This new capacity is good news for us because we will be able to increase our bulk sugar exports to these regions. Our strategy has been to service niche markets because of the dominance of Brazil. Our reputation and the flexibility and storage capabilities at the SA Sugar Terminal helps to give us a competitive edge in these markets,” Trikam says.

Sugarcane is grown in 14 areas in SA, over about 412000 ha, stretching from northern Pondoland in the Eastern Cape through the coastal belt and midlands of KwaZulu-Natal to the Mpumalanga lowveld. ‘ Business Day.

March 2007
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