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August 09, 2010

South African sugar production hurt by low rainfall

by Edward West

Tongaat Hulett, a large-scale agri-processing business and one of SA's biggest sugar producers, has said local production is being hurt by low rainfall in the KwaZulu-Natal north coast region.

Peter Staude, CEO of the KwaZulu-Natal sugar, starch and property development group, said local sugar production in the 2010-11 season was expected to fall slightly from 2009-10, when 564 000 tons were produced.

Mr Staude was updating shareholders about the group's operations during the annual general meeting recently.

Rainfall on KwaZulu-Natal's north coast fell to 252mm during the January-June cane-growing months this year, compared with a long-term mean of 491mm. The anticipated decline in production was in spite of the hectares under cane supplying the mill increasing by about 2000ha.

Turning to maize, Mr Staude said the total South African maize harvest for this year was projected at more than 13-million tons, the largest crop in 29 years. The group converts more than 600 000 tons of maize a year into starch and starch-based products for use in food manufacturing and a range of industrial products.

The price of maize in SA through to this month was trading close to the world price, which would in turn contribute to the competitiveness of the starch operation.

Sales of starch and glucose continued to reflect the contraction in consumer spending, particularly in prepared foods, confectionery and canning.

A key focus for the group, including its other southern African operations, was to increase sugar production from 957 000 tons milled in the 2009-10 season to the installed milling capacity of 1,9-million tons a year, with a reduction in the cost of production.

Sugar production in Zimbabwe for the 2010-11 season was expected to be 330 000- 350 000 tons, up from 259 000 tons in 2009-10. In Mozambique, sugar production was expected to be 230 000- 250 000 tons, from 134 000 tons in 2009-10.

Unseasonal rain in Mozambique and rehabilitation work on the Hippo Valley mill in Zimbabwe caused sugar production to start later than expected.

Exchange rate movements in the past few months had not been in Tongaat's favour, with the rand now 16% stronger against the euro than in 2009-10. Movement in the rand, dollar, euro and Mozambique meticais affects Tongaat's revenue streams, costs and the conversion of profits into rand.

Business Day

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