20 September 2023
By: Lloyd Phillips
The sugar industry, which usually records a loss for raw sugar, is now paying dividends for South Africa’s primary sugarcane value chain.
After enduring a particularly challenging 2022-2023 processing season, the primary sugarcane value chain is cautiously optimistic that the 2023-2024 season will end on a more positive note.
Last year, the industry faced issues such as Tongaat Hulett Sugar and the Gledhow Sugar Company going into voluntary liquidation, weak investor confidence, and an unfavourable recoverable value (RV) price of R5 435.07/ton paid to already struggling sugarcane producers.
According to industry experts, the 2023-2024 season has been much more promising so far. The hope is that these better conditions will continue at least until the end of the fiscal year.
Siyabonga Madlala, CEO of the South African Farmers Development Association (Safda), says that in July the RV price was a much more favourable R7 327.33/ton.
The main contributors to the upward price trend include an improved sugarcane processing estimate of 18,573,789 tons (2022: 17 911 409 tons), an improved estimate of saleable sugar production at 2 053 053 tons (2022: 1 926 474 tons), increases in the average prices of refined sugar, brown sugar and molasses in the market of the Southern African Customs Union, the world market price for raw sugar rising to more than US$0.26 per pound, and the weaker rand-to-dollar exchange rate.
“As Safda, we are satisfied with the current trend of the RV price and hope that it will continue until the end of the season. If there are no drastic negative changes to this trend, producers will be able to plan for maximum profits during the 2024-2025 season,” says Madlala.
Thomas Funke, CEO of SA Canegrowers, says the sugar industry hopes for the continuation of South Africa’s surplus sugar exports to a world market that has strengthened.
The world price is usually lower than South Africa’s production costs, but this has gradually changed since the 2022-2023 season. The higher world price, coupled with the weaker rand, means higher foreign income for the local sugar industry.
“In general, SA Canegrowers is currently cautiously optimistic. So far this year, all mills have overpaid their operating levies,” says Funke.
“We hope this trend will continue and that the business rescue processes will be successfully completed. The current season’s higher RV price also helps most sugarcane producers recover from the low final price of last season, but it must continue for them to fully recover.”
Trix Trikam, executive director of the South African Sugar Association, says the completion within the next few months of phase 2 of the sugar cane value chain master plan until 2030 will be an important goal. One of the main priorities of this plan is to come up with clearly defined, diversified solutions to ensure the industry’s sustainability.
“Diversification opportunities being explored include sustainable aviation fuel, bioethanol for fuel blending, food byproducts and bioplastics. Most projects are still in the scope, market analysis or pre-feasibility stages,” he says.
“The government must ensure that there is a conducive policy and legislative framework to enable the implementation of the plan. Equally important is that the government must ensure there are sufficient subsidies available to kickstart the projects and incentives to reward capital investment.”
