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• World of sugar

World of sugar

Sustainability

The global sugar industry is one of the world's oldest agriculturally-based industries, which is estimated to produce around 184.9 million tons of sugar in the 2014/15 international sugar season.

Whilst many forces continually impact upon annual global production, a major sustainability feature of this industry is its historic and continuing sugar consumption growth, which on average, increases by around 2% per annum. Africa, with its favourable agronomic conditions, has significant potential to contribute towards the production needed to meet this growing demand. Illovo, as a world-class, cost-competitive, highly-efficient sugar producer, operating in Africa, is wellplaced to participate in this ongoing growth opportunity. The following tables, graphs and data are intended to promote a broader understanding of the dynamic international circumstances in which the Illovo group operates.

Overview

More than 100 countries produce sugar, around 79% of which is made from sugar cane grown primarily in the tropical and subtropical zones of the southern hemisphere, and the balance from sugar beet which is grown mainly in the temperate zones of the northern hemisphere.

Currently, 67% of the world's sugar is consumed in the countries of origin, whilst the balance is traded on world markets.

Source: Czarnikow Sugar

World sugar production (million tons)		World sugar consumption (million tons)
During the past three years, world sugar production has levelled off to around 185 million tons, following an extended period of growth.		Global sugar consumption growth continues to demonstrate steady growth of approximately 2% per annum.

World raw sugar prices have fallen over the past four years in response to an extended period of global sugar production surplus which has resulted in a significant build-up of stocks at origin and destination.

Top sugar producers 2014/15 estimate (South Africa is a member of the SADC)		Top sugar exporters 2014/15 estimate (South Africa is a member of the SADC)
Brazil and India combined account for around 37% of global sugar production which is estimated at 184.9 million tons in the current 2014/15 international sugar season.		Approximately 67% of total world sugar production is consumed in the country of origin. Brazil represents approximately 50% of global exports.

World raw sugar price (US cents/lb)		Preferential prices (free on board) (US cents/lb)
World raw sugar prices continued to trend downwards as the result of the weak Brazilian Real, low oil price, Indian and Thailand sugar export subsidies and four consecutive years of global sugar production exceeding consumption and the consequent high level of international sugar stocks that have built up at origin and destination.		EU market prices have continued to trend downward in the run up to the deregulation of the EU sugar industry in October 2017. The main reasons behind this have been the effect of "exceptional measures" used by the European Commission in previous years to increase supply of "in quota" sugar, together with the improved supply prospects from existing ACP/LDC countries and new quota holders in Latin American countries.

Per capita consumption 2014/15 (kilograms per annum)
GDP growth across Africa generally has continued to increase at a rate in excess of other developed economies across the globe and therefore the prospect for enhanced levels of consumption growth on the continent remains positive.

Southern African Development Community statistics

SADC countries		Sugar production by country (million tons) est
* Sugar producers
		Total sugar production across the SADC has fallen to 5.6 million tons largely as a result of decreased production in South Africa due to drought and frost damage.
		Export markets (million tons) est
		Exports from the SADC region onto the world market are expected to drop significantly in the current 2014/15 international sugar season due primarily to the lower production in South Africa and unattractive world sugar prices.
		Local consumption (million tons) est
		Sugar consumption continued to grow with SADC sugar-producing countries consuming around 4.5 million tons domestically.

South African Custom Unions statistics
Cane production (million tons)		Sugar production and markets (million tons)
Cane production in Swaziland grew marginally above the previous season but recorded a more than two million ton drop in the South African crop due to drought.		As a consequence of the drop in South African sugar cane yields due to drought, sugar production decreased marginally below that of the 2013/14 season.

South African statistics
Cane production (million tons)		Sugar production and markets (million tons)
Reduced cane production of almost 2.3 million tons in 2014/15 was attributed to the adverse impact of drought throughout KwaZulu-Natal and severe frost in the Midlands.		The quality and quantity of drought and frost-affected cane supplied to sugar mills during the season resulted in the reduction of South African sugar production to 2.013 million tons from 2.344 million tons produced in 2013/14. The domestic market continued to be impacted negatively by high volumes of imported sugar stocks that entered the country duty-free prior to the implementation of the revised tariff. It is expected that this trend will be reversed following the significant reduction in imports during the 2014/15 season.
Consumer market sales (000 tons)		Industrial market sales (000 tons)
Local consumer markets supplied by South African producers were again negatively affected by the influx of low-cost duty-free imports, largely from Brazil.		Industrial market sales by South African producers also felt the negative impact of increasing volumes of duty-free imports entering South Africa.

Illovo group statistics
Cane production (million tons)		Raw material throughout (million tons/including outgrowers)
Group cane production of 6.3 million tons was marginally above that produced in the previous season (2014: 6.1 million tons) while total cane from independent farmers decreased to 8.8 million tons (2014: 9.4 million tons). Record cane production was achieved in Zambia, Mozambique and at Dwangwa in Malawi.		Around 61% of cane throughput provided by the group's own agricultural estates and by private growers in 2014/15 was cultivated under irrigation. Excluding South Africa, this proportion increases to 89%.
Sugar production (million tons)		Group markets (million tons)
A significant reduction in cane yields due to the drought in South Africa impacted on total group sugar production, declining from 1.83 million tons in 2013/14 to 1.76 million tons in 2014/15. Record sugar production was achieved in Zambia, Mozambique and at Dwangwa in Malawi.		Approximately 63% of the group's sales volume continues to be sold into the domestic markets where we produce sugar. In 2014/15, these sales amounted to 1.121 million tons, sold via a range of prepacked and bulk industrial and direct consumption sugars in brown and refined sugar offerings.
Rened sugar production (000 tons)		Illovo share of industry production (%)
Refined sugar production was marginally above that of the previous season. The Zambian refinery expansion project has commenced and will increase the group's refined sugar capacity by around 100 tons.		Illovo remains a significant producer in each of the countries in which it operates.