South African sugar producers expect to have a better April 2011-March 2012 season due to good rains, after drought weighed on output the previous season, a senior industry official said. Last year's drought in South Africa's rain-dependent sugar-growing area of KwaZulu Natal, is expected to push the 2010/11 sugar output in Africa's biggest economy to fresh 15-year lows.
"It is anticipated that 2011 will be an improved year compared to 2010, but full recovery, given normal rainfall will only take place in 2012," Trix Trikam, executive director of the South African Sugar Association said on Thursday in a written reply to Reuters questions. Trikam said the challenge in this year would be to rebuild the financial strength of the industry after the setback in 2010 and ensure a full recovery by 2012.
"The recovery of the world economy is starting to impact on fuel prices and will impact on fertiliser prices. In this case the strong rand will assist in reducing the impact on the industry," Trikam said. The rand <ZAR=D3> has gained 28 percent against the dollar since the beginning of 2009. Higher input costs pushed South Africa's 2009/10 season total sugar production to a 15 year low of 2.18 million tonnes.
Sugar producers are also betting on duty-free export deal for the commodity to the European Union (EU) to enhance revenue. The EU, South Africa's largest trading partner, unveiled a new trade regime in 2009 that allowed the world's poorest countries quota and tariff-free access into the market. However, South Africa is excluded from the classification of a Least Developed Country and consequently does not benefit from the European Union regulation.
The government and the EU were in talks to conclude an economic partnership agreement that would allow producers to export sugar into the bloc, Trikam said. "It is not expected that the negotiations will be completed before mid-2011," he said.