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Zambia Sugar to Reduce EU Exports

By Nawa Mutumweno

Zambia Sugar Company is reducing its sugar exports into the European Union (EU) to the regional market in view of the sugar reforms in the bloc to be effected in September 2017.

The agribusiness company will this year reduce sales to the EU from 22 percent to 14 percent as it explores Africa’s regional markets, both traditional and new markets.

According to managing director, Rebecca Katowa, this follows the sugar reforms that have impacted on the sugar regime and resulted in prices in the EU converging into global prices.

The prices are below the cost of production and reflect residual markets and key players, namely Brazil, Thailand and India, who put sugar on that market with India’s sugar being subsidized.

’’The strategy is to move volumes away from the EU to regional markets because the regional market provides valuable alternatives. Shifting export sales away from the EU to the region is expected because realisations in these markets will continue to be influenced by exchange rate movements,’’ she elaborated at a stakeholders’ breakfast meeting in Lusaka recently.

The prices of sugar are expected to remain above world levels within the region despite increasing levels of competition among regional producers, Mrs. Katowa added.

The company is looking to expanding exports to the Great Lakes region and the Democratic Republic of Congo (DRC), among other African markets.

Meanwhile, Zambia Sugar will this month-end commission the over K500 million refinery which is projected to more than double sugar production to 90 000 tonnes annually, reaffirming the firm’s position as the largest producer in Africa.

Currently, the sugar agribusiness company produces 40 000 tonnes of sugar per annum.

‘’The project was launched last year and will be on stream at the end of the month and contribute to our growth strategy,’’ she said.

Meanwhile, the company’s Commentary for the Year Ended March 31, 2016 says a number of factors impacted adversely on sugar production in the period under review. These included dry climatic conditions in November and December 2015, power interruptions to irrigation and the outbreak of yellow sugarcane aphids which reduced sugarcane yields by 11 percent across the entire harvest area.
This yield decline was partly offset by a 2 percent increase in area under cane delivered. Smallholder schemes supplied 10 percent of the total 3.102 million tons of cane crushed by the Nakambala mill. Consequently, sugar made was reduced by 10 percent from 424 000 tonnes achieved last year to 380 400 tonnes.

‘’The reduced sucrose in cane was partially offset by improved sugar recoveries in the mill. Refined sugar production also increased to meet growing demand. The season saw a significant improvement in factory throughput, reflecting the benefit of improved equipment reliability and preventive maintenance practices together with a sustained focus on continuous improvement initiatives,’’ the Commentary reads in part.

Total revenue grew by 6 percent year on year, from K1.91 billion to K2.02 billion, largely due to continued growth in the domestic market where direct consumption increased by 7 percent and industrial consumption grew by 4 percent. In order to maximize revenues from reduced production, the sales mix was adjusted by reducing bulk EU exports by 45 percent. The remaining sugar was sold into Africa’s regional markets where prices remained under pressure from world market sugar.

Prospects

The factory commenced crushing in the third week of April and operations have quickly stabilized. Early season, sugarcane yields are at expected levels and should improve as the crop matures.

Sugar cane yields and sucrose in cane are expected to remain relatively unchanged in the 2016/17 production season. The crop has been negatively affected by drought conditions, power shortages, the low water levels in the Kafue River and pest infestations due to drought stressed cane. Production is, therefore, expected to match the previous season.

Sugar production is, therefore, expected to match the previous season. Reasonably strong growth is expected in the local market. However, margins in the regional export markets are expected to remain under pressure from surplus sugar stocks on the world market.

‘’Realizations in these export markets will continue to be influenced by exchange rate movements. The new expanded sugar refinery will help the company take advantage of the growth in the local and regional industrial sugar markets,’’ it adds.