The FINAL RV price for 2016/17, in respect of cane delivered in the 2016/17 season, was declared at R4 931.91 per ton. This represents an increase of R78.07 compared with the previous price (February 2017 for cane delivered in January 2017). The higher final price is due to the 7.75% increase to the notional sugar price, which was implemented from the beginning of March, resulting in a weighted average increase of 1,88% for the season. Sugar production continued its downward trend in the final price calculation, together with the sugar:RV ratio, as final adjustments for the season were processed. This has somewhat tempered the positive effect of the notional price increase. The sugar:RV ratio decreased by 0.08% (90.04% vs. 90.12%). Gross sugar production was lower by 2304 tons (1,553m tons vs. 1.555m tons). Lower sugar production combined with the lack of export availability has caused the LMDE to be reduced by 2 443 tons (1.534m tons vs. 1.537m tons).
World Market and Pricing
The front month of the No. 5 contract price fluctuated in a range between $US528 and $US560 since the beginning of February 2017 but the second week of March saw the price falling below the range to the current level of $US512.40. The declining trend in world market pricing, the firming of the R/$ exchange rate and the recent increase in local market pricing has eroded protection of the domestic market and has seriously exposed the market to imported sugar.
Final South African sugar production in 2016/17 amounted to 1 553 229 tons. Poor cane quality due to the drought conditions and below-par sugar recoveries were prevalent for the season and consequently there was no sugar available for export. Saleable sugar production reduced to 1.539m tons because of higher refining losses.
Opening Price outlook
With the recent firming trend in the R/$ exchange rate and the consequent erosion of tariff protection of the domestic sugar market, there has been a surge in the quantity of imported sugar, which could seriously reduce the demand for local market sugar, if left unchecked. The forecast opening price for 2017/18 thus includes a combination of lower local market demand estimates and reduced local market pricing to estimate a likely opening price range, should either of these interventions be adopted as an industry strategy. The initial opening price estimate for the season is a likely R4 789 within a range between R 4 622 and R 4 940.