Durban - There is a joke about a woman who makes a Freudian slip at the breakfast table. "I meant to say to my husband, 'Please pass the sugar," she says. "But instead I said, 'You bastard, you ruined my life'."
The anecdote offers an apt, if tongue-in-cheek, description of the spat last year between the millers that dominate the self-regulated sugar industry and the beverage, chocolate and confectionery industries that consume 15 percent of local refined sugar.
The drama reflected most of the factors that affected the sugar industry in a turbulent year, characterised by changes in the determination of local sugar tariffs and a volatile world sugar price.
The tension escalated when users branded the industry "uncompetitive", accusing millers of not wanting to negotiate prices and implying they were milking consumers.
In what was later described by the Competition Tribunal as a "rather theatrical" act, the users, led by Coca-Cola, imported a token sugar shipment of 5000 tons (they use about 200 000 tons a year). The import came at a premium because of the protective sugar tariff.
A report by Investec Securities said the industrial buyers' tactics were motivated by "political lobbying" to influence the government's decision on the level of the new US dollar-based reference price, which came into effect months later.
The report blamed problems in the domestic marketing of sugar on the "perceived arrogant attitude" of local milling companies towards pricing.
Don MacLeod, the managing director of Illovo Sugar, the miller that holds 70 percent of the market for industrial users, said their action was a "public relations exercise, a high-profile way of making sure consumers know there is protection in place".
Continued protection in some form is certain, not least because world prices are below average production costs in most sugar-producing countries, including South Africa.
The department of trade and industry has indicated its support for the three regulatory pillars of the industry: tariffs to protect against world prices, the equitable sharing of industry proceeds among millers and growers, and a single-channel raw export arrangement.
This year the department is likely to say whether it intends to further simplify the sugar industry agreement, following the announcement last year of a new sugar duty formula.
The old system determined duties based on changes in the domestic price. But the new tariff, which came into effect in October, is the difference between the world price and a set reference price of $330 a ton, calculated using a 10-year average of the world price plus a 20 percent premium to compensate for protectionist policies in most sugar-producing nations. It will be adjusted when there is a $20 deviation in the 20-day moving average of the world price.
The tariff, which will force the local industry to be more responsive to the world price and the rand-dollar exchange rate, was among last year's most important changes in the industry.
Other significant events included the deregulation of single-channel marketing for refined sugar; South Africa joining the Global Alliance for Sugar Trade Reform, which is lobbying for the co-ordinated removal of tariffs and export subsidies; and the agreement between members of the Southern African Development Community, paving the way for net surplus sugar producers to have phased access to the South African Customs Union market.
Last year South Africa yielded a record crop of 2,677 million tons of raw sugar.
"This was because we had sufficient rain and sunshine E and we introduced a new cane quality scheme for millers and growers," said Trix Trikam, the executive director of the SA Sugar Association.
"It's a bit early to tell how well it's working, but the mere fact we've gotten more crop indicates that it is working."
Trikam was optimistic in his outlook for world prices. "The experts are saying that prices will hold at the 9 US cents/10 cents a pound level," he said.
South Africa, which exports about 55 percent of its sugar, sold forward at about 7 US cents a pound, and as a result could not reap the full benefits of the improved price last year There is likely to be pressure for a shrewder hedging strategy this year.