Sasa is expecting a fairly good crop

Coming season’s production is up on last one

THE SOUTH African Sugar Association (Sasa) expects sugar cane production to be in line with the crop produced last season in the coming 2019/20 season.

Sasa executive director Trix Trikam said this week that the industry expected a reasonable crop in the 2019/20 season, starting in April

2019, similar to the crop of the current 2018/19 season.

According to the US Department of Agriculture report produced last year, it said it expected South Africa to produce 2.2 million tons in the 2018/19 season, up by 7 percent yearon-year compared to a year ago.

Trikam said while the industry could not yet be considered to have fully recovered from drought, there are areas where production of cane is closer to agronomic potential than it has been for several years.

“From a sugar market perspective, the reduction in demand as a result of the Health Promotions Levy implemented on April 1, 2018, has had a devastating impact on the local industry in a very short time, and this is expected to continue in 2019,” Trikam said. He said demand has dropped more rapidly than analysis prior to the implementation of the levy indicated was possible. “The industry strongly opposed the implementation of the levy,” he said.

Tongaat Hulett, in its results for the six months to end September, reported a decline in its operating profit in its sugar operations.

It said the difficult local market conditions experienced by the sugar operations in South Africa and Mozambique during the second half of 2017/18 continued into the first half of 2018/19, with a resultant negative impact on both revenue and cane valuations.

The group’s sugar operations reported a combined operating profit of R1.14 billion during the period, down from R1.31bn compared to a year earlier, before cane valuations. However, sugar production during the period increased to 954 000 tons, up from 848 000 tons compared to the same period in 2017.

The group admitted during the results that the challenges facing the South African and Mozambique sugar operations were receiving urgent attention. This encouraged the company to have a positive outlook for the year ahead.

Tongaat Hulett sees potential in the long term in its sugar operations with a potential of producing

1.60 million tons. The group had based this potential on the existing sugar cane footprint, under normal growing conditions and on completion of foreseeable planting partnerships. The group total sugar production in 2018/19 season was estimated to be between 1.31 million tons and 1.35 million tons compared to the 1.17 million tons produced in 2017/18 season.

Its sugar production is expected to increase in the 2019/20 season to exceed 1.40 million tons, underpinned by the prospect of normal summer rainfall and improvements in cane yields.

Tongaat Hullett interim chief executive Sydney Mtsambiwa said all sugar operations continued to focus on reducing operating costs through increased production efficiency.

Trikam said the other factor facing the sugar industry was that world market sugar dynamics continued to be challenging, with the world producing a surplus of sugar.

“International prices reflect this surplus,” he said.

Tongaat Hulett has operations outside of South Africa and it has received a much-needed boost in Zimbabwe, where the Tugwi-mukosi dam has secured the availability of bulk water for irrigation for the next two years.

“The additional production will support higher export sales into regional deficit markets at premium prices. Recently, a favourable outcome was reached with the government providing Tongaat Hulett with security of tenure over its assets in Zimbabwe. Tongaat Hulett’s outlook on its Zimbabwe operations remains positive,” the group said.

In South Africa, indications are that imported sugar is working itself out of the market, although the extent of the “buy-in” at the lower price may slow sales volumes in the second half of the year.

“Consequently, export sales into world price-related markets will increase. A return to the sugar industry’s normalised local sales levels of 1.65 million tons is expected in 2019/20.

“The higher duty protection will assist in rebuilding margins of both growers and millers, the full benefit of which, together with further growth in sugar production, will be reflected in the 2019/20 financial results,” the group said.

In Mozambique, Tongaat Hulett said robust measures were being taken to stem the flow of illegal sugar imports from the region in order to recover local market share.

“The refined sugar will replace imported white sugar, satisfy the country’s growing industrial demand and enhance returns from the domestic price premium relative to the realisations from export markets,” it said.

Tongaat expect an estimated

7 000 tons of refined sugar would be produced in the second half of 2018/19 in Mozambique, with the full year benefit to be realised in 2019/20.