Nompumelelo Magwaza
Local sugar cane growers have experienced improved financial circumstances for the 2011/12 season due to favourable sugar world prices, despite significant input cost increases facing the industry.
At the annual meeting of the SA Cane Growers Association in Durban last week, growers forecast the industry would face a relatively improved business environment for the 2012/13 season.
Initial prospects for the season show a better year ahead with a sugar crop of about 2.2 million tons for the 2012/13 season compared with 1.8 million tons in the current season.
According to the cane growers, the final recoverable value price increased from R2 572.14 a ton in 2010/11 to R3 017.51 a ton in the current season, an average increase of 17.3 percent.
World sugar markets continued to trade in a favourable price range with an average price of $0.2844 (R2.31) a pound achieved, up 73.4 percent from the previous season.
The executive director of the cane growers’ association, David Wayne, said although the export market was not so favourable, export revenue per unit improved.
The export revenues recorded a decrease of 43.4 percent to R599 million due to the drought coupled with an increase in local market demand for sugar.
The net industry proceeds for 2011/12 totalled R9.24 billion, with cane growers receiving a share of R5.9bn.
Despite the drought in the previous season hampering cane growth, growers recorded an increase of 4.89 percent in crop production with a final cane crush of 16 800 277 tons.
News about the possibility of generating surplus electricity and other valuable products from sugar cane had got the industry excited, but Wayne said there was a need for a review in government policy on renewable energy programmes, especially in the bio-ethanol fuel sector.
He added that currently the policy focused on greenfields projects and excluded existing industries. Wayne also raised concerns about the delays in the land reform programme, saying that the uncertainty was discouraging potential investments.
In its 2012 annual report, sugar maker Illovo said the cane sugar industry held a major competitive advantage in that the residual fibre from the cane extraction process was used as a bio-renewable fuel feedstock for factory boilers to produce electricity to power its own operations.
“There exists significant potential to supply surplus power into (the) national electricity grid from existing and new operations provided that there is a stable regulatory environment within which to operate,” Illovo chairman Don MacLeod noted.
Both Illovo and rival Tongaat Hulett recorded a rise in operating profit for the year to March.
Illovo, which has operations in Malawi, Zambia, Swaziland, Tanzania and Mozambique, reported a 31 percent increase in operating profit to R1.35bn, while Tongaat Hulett grew total profit from its combined operations by 58 percent to exceed R2bn for the first time.
Wayne said cane growers also raised concerns about reported violent events and the rule of law not being upheld as disgruntled land beneficiary communities forced certain issues on properties.
“Should such action be allowed to pass unchecked, this will hugely dent grower sentiment and investor confidence in the sugar industry and at a time when industry stakeholders will be looking to invest substantial sums of money in the industry,” cane growers said in a statement.