South African sugarcane recovers from drought

South Africa is recovering from two consecutive years of drought in its Kwazulu Natal province, where 75 per cent of all its sugarcane is grown. With the return of seasonal rainfall patterns, sugarcane production is forecast at 17.9 mmt, up six per cent over the previous year.

Although an improvement, the projected 2012/13 production level is below the 15-year average of 20.4 mmt. Harvested area for 2012/13 is projected at 280,000 hectares, the same as the 2 previous years. South African sugarcane area has been trending down the last 15 years. The decline is attributed to lower profit margins, land reform uncertainty, infrastructure constraints, and urbanisation.

Sugar production for 2012/13 is projected at 2.2 mmtrv, about 15 per cent over the 2011/12 production of 1.9 mmtrv, the lowest of the last 15 years. The sugarcane-to-sugar ratio is projected at 8.50, less than last year’s dismal 9.22, but not as low as the 8.35 ratio in 2010/11.

There are 29,130 sugarcane growers in South Africa. About 95 per cent of these growers (27,580) produce about 8 per cent of the total sugarcane crop. The remaining growers produce 85 per cent, and milling companies that own their own estates grow 7 per cent. Most areas depend on rainfall, but about 30 per cent of the total, mainly in the northern parts of the Kwazulu Natal and Mpumalanga Provinces, rely on irrigation. There are 14 sugarcane mills in South Africa. Large firms include Ilovo Sugar Ltd. (4 mills) and Tongaat Hulett Sugar Ltd. (3 mills). Twelve mills are located in Kwazulu Natal and two in Mpumalanga. Growers and mills are partners in the South African Sugar Association (SASA). Although officially sanctioned, the SASA operates free of government control. Payments to growers are handled through the SASA according to a Division of Proceeds. Domestic and export sales of sugar and byproducts are shared between growers and the mills in predetermined proportions after subtracting administrative expenses. Payments to growers are adjusted to reflect the quality of the cane delivered to the mills.

South Africa is the chief supplier to the South African Customs Union (SACU). The SACU includes South Africa, Botswana, Lesotho, Namibia, and Swaziland. Demand growth is projected at 2 per cent, considered to be a relatively low amount, due to slow economic growth and high sale prices. Demand is expected to pick up in 2013 by 3.6 per cent and in 2014 by 4.2 per cent. For 2012/13, South Africa is projected to supply 1.6 mmt to the SACU. An additional 340,000 mt from Swaziland is expected.

South African sugar exports are projected at 600,000 mt—half raw sugar and half refined sugar. Export growth over 2011/12 is expected to exceed 80 per cent. About 28 per cent of production is projected to be exported, above the 17 per cent for 2011/12 but below the 10-year average of 45 per cent.