Voluntary Report - public distribution

**Date:** 5/5/2004

**GAIN Report Number:** RH4002

RH4002

**Zimbabwe**

**Sugar**

**Report Update**

**2004**

**Approved by:**

![](media/image1.wmf)Scott Reynolds

U.S. Embassy, South Africa

**Prepared by:**

Herman Germishuis

**Report Highlights:**

Zimbabwe is expected to produce 4.1 million tons of sugar cane this year
after 4.5 million tons were produced in the 2003/04 season. Sugar
production is nonetheless expected to reach 525,000 tons compared to
508,000 tons in the previous season. Exports from the 2004/05 production
is forecast at 155,000 tons compared to 126,000 tons in 2003/04. The US
quota was not serviced in 2003/04. Zimbabwe\'s land reform program has
now reached the sugar industry.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Unscheduled Report

Pretoria \[SF1\]

\[RH\]

# Summary {#summary-1}

The marketing year used in this report is an April to March year. For
example, MY 2005 denote the milling and marketing season from 1 April
2004 to 31 March 2005.

Zimbabwe is expected to produce 4.1 million tons of sugar cane this year
after 4.5 million tons were produced in MY 2004. The decline in
production is ascribed to delays encountered during the 2004 season,
which limited the productive season for the 2005 crop. Sugar production
is nonetheless expected to reach 525,000 tons after 508,000 tons were
produced in 2004. The better sugar yield is the result of higher quality
cane brought about by sufficient sunlight hours.

Exports from the 2005 crop are at this stage forecast at 155,000 tons
after the 2004 exports reached 126,000 tons.

Zimbabwe's economic woes continue. The government of Zimbabwe (GOZ) is
reluctant to adjust the official exchange rate. However, to try to
eliminate the "parallel" (black) market, a daily auction of foreign
currency has been introduced. This has reduced the rate on the parallel
market from ZW\$6000 to ZW\$4200:US\$1. However, the government is still
critically short of foreign currency to meet the country's needs. The
parallel market still operates but at rates close to the auction rate.
Exporters are required to sell 25% of their foreign currency earnings to
GOZ at ZW\$824:US\$1 and the remainder can be sold at the daily auction.
The official exchange rate is still ZW\$55:US1 although very few people
use it.

Exchange rates

March 23, 2002, US\$1.00 = Z\$322.00 (parallel market)

US\$1.00 = Z\$ 55.00 (official rate)

April 04, 2003, US\$1.00 = Z\$1 420.00 (parallel market)

US\$1.00 = Z\$ 55.00 (official rate)

April 05, 2004, US\$1.00 = Z\$4 468.08 (auction rate)

US\$1.00 = Z\$ 55.00 (official rate)

# Sugar cane

  ------------------- -------------- ---------- ------ ---------- ------ ----------
  **Country**         **Zimbabwe**                                       

  **Commodity**       **Sugar Cane**                                     

  1000 Ha.            2003           Revised    2004   Estimate   2005   Forecast

  1000 Mt.            USDA \[Old\]   Post       USDA   Post       USDA   Post
                                     \[New\]                             

  **Market Year                      04/2002           04/2003           04/2004
  Begin**                                                                

  Area Planted        44             44         0      45         0      45

  Area Harvested      43             44         0      44         0      44

  Production          4390           4419       0      4533       0      4121

  TOTAL SUPPLY        4390           4419       0      4533       0      4121

  Utilization for     4390           4419       0      4533       0      4121
  Sugar                                                                  

  Utilizing for       0              0          0      0          0      0
  Alcohol                                                                

  TOTAL UTILIZATION   4390           4419       0      4533       0      4121
  ------------------- -------------- ---------- ------ ---------- ------ ----------

# Production

Zimbabwe's 2005 sugar cane crop now being cut is estimated at 4.1
million tons, 9% less than the 2004 crop. The decline is mainly due to
delays during the 2004 milling season, which did not allow the 2005 crop
to mature fully. The estimate may even be optimistic, as the land
re-distribution program has now also affected the sugar industry. The
new settlers are facing management and financing problems. The fields
are not being properly fertilized and irrigated while very little is
being done to control pests and diseases. There is also a legal battle
on about ownership of the cane, especially the 2004 deliveries that were
produced by the original commercial farmers.

All sugar in Zimbabwe is grown in the South-Eastern Lowveld under
irrigation. Rainfall for the summer of 2003/2004 up to the end of March
2004 reached about 80% of what could be expected in the sugar growing
areas, but in the dam catchments the rainfall already exceed the
average, and as a result, all the dams feeding the industry are full.
This means that the sugar industry has two years water supply available.

The cost of water is, however, increasing. In 2002, the GOZ created the
Zimbabwe National Water Authority (ZINWA) to manage the country's water
supplies. ZINWA then put the cost of water to the sugar industry at
about Z\$50 per thousand litre. By February 2003, this had been
increased to Z\$150/1000 litre but by March 2004 a price of
Z\$165,000/1000 litre was announced. The Minister of Water Affairs then
intervened and cut the price to Z\$85,000/1000 litre. Using the auction
exchange rate of about Z\$4200 per US Dollar this amounts to about US\$
20 per 1000 litre, a price that a cane sugar industry cannot afford.

During the summer of 2002/2003, long spells of cool, overcast weather
were experienced in February and March 2003 and, as a result, flowering
of the cane reduced sugar yields. Delays throughout the cutting season
caused by lack of fuel, spares for rolling stock and locomotives, and
general labour unrest caused the cutting season to be extended to the
22nd and the 26th of January 2004 respectively at the two mills.

Management of both mills were confident that their mills would be ready
to start the new season in April 2004. The long cutting season in 2004
will adversely affect yields in 2005, as a significant number of fields
will have to be cut after only 11 months of growth. Both mills are
determined to finish the cutting season by December 2004.

There will be no expansion of the area planted until such time as the
giant Tokwe-Mukorsi dam is completed. Construction of this dam was
started in 1998 but due to the Government of Zimbabwe's (GOZ\'s)
inability to meet its financial commitments, construction halted in
April 1999. Indications are that GOZ has found adequate funds to restart
construction. It remains to be seen whether construction will continue.
Once this dam is completed in 4-5 years\' time, it is expected that an
additional 8,000 hectares of cane could be planted. This will
significantly increase sugar production for export. In order to cater
for the increased cane production, both mills will expand their crushing
capabilities. It is unlikely that a new mill will be built in the near
future.

The LOMAZ (Lower Mazowe Valley) project to produce sugar in the
North-east of Zimbabwe is continuing to experience difficulties due to
the government's current land policies as well as the extremely unstable
economic environment in the country. Should this project come to
fruition, it could add about 140,000 MT of sugar to national production.

Any changes in production over the last few years and for the
foreseeable future will be due to differences in yields from season to
season. The main factor that will affect yields, with all the dams full,
will be the sunshine hours in the period December to early March when
peak vegetative growth occurs. All cane, except the replanted cane, is
cut in a 12-month cycle. Replanted cane is generally cut within a 15-16
month cycle. One of the larger estates has a few fields, which survived
the 1992 drought and is now into their 22^nd^ year of production. Yields
of these fields are still adequate for them not to be replanted.

# Centrifugal Sugar

  --------------- ----------- ---------- ---------- ---------- ---------- ----------
                  Zimbabwe                                                

                  Sugar                                                   

  1000 mt.        2003        Revised    2004       Estimate   2005       Forecast

                  USDA        Post       USDA       Post       USDA       Post
                  Official    Estimate   Official   Estimate   Official   Estimate
                  \[Old\]     \[New\]    \[Old\]    \[New\]    \[Old\]    \[New\]

  Market Year                 04/2002               04/2003               04/2004
  Begin                                                                   

  Beginning       84          84         121        37         125        30
  Stocks                                                                  

  Beet Sugar      0           0          0          0          0          0
  Production                                                              

  Cane Sugar      580         580        540        508        0          525
  Production                                                              

  TOTAL Sugar     580         580        540        508        0          525
  Production                                                              

  Raw Imports     0           0          0          0          0          0

  Refined         0           0          0          0          0          0
  Imp.(Raw Val)                                                           

  TOTAL Imports   0           0          0          0          0          0

  TOTAL SUPPLY    664         664        661        545        125        555

  Raw Exports     94          94         128        83         0          100

  Refined         60          60         53         43         0          55
  Exp.(Raw Val)                                                           

  TOTAL EXPORTS   154         154        181        126        0          155

  Human Dom.      389         473        355        389        0          400
  Consumption                                                             

  Other           0           0          0          0          0          0
  Disappearance                                                           

  Total           389         473        355        389        0          400
  Disappearance                                                           

  Ending Stocks   121         37         125        30         0          0

  TOTAL           664         664        661        545        0          555
  DISTRIBUTION                                                            
  --------------- ----------- ---------- ---------- ---------- ---------- ----------

# Production

MY 2005 sugar production is only expected to reach about 525,000 tons
compared to the 508,000 tons produced in 2004. The tons cane per ton
sugar ratio is, however, expected to improve to eight tons cane per ton
of sugar compared to the 8.9 tons needed in 2004, which explains the
anomaly of higher sugar production from a smaller cane crop. The higher
cane quality is due to sufficient sunlight and moisture during the
growing season.

# Consumption

Although the MY 2003 domestic consumption figure is high it probably
includes informal exports of Zimbabwean sugar into the region. This has
now virtually stopped due to the change in exchange rate caused by the
introduction of forex options. The estimated 2003/04 domestic sales are:

  -------------- -------------- -------------- -------------- --------------
  Zimbabwe       Sugar          Domestic       Sales          1000 Mt.

  MY 2003/04     Refined        Semi-ref.      Speciality     Total

  Industrial     84             16             3              103

  Consumer       166            116            4              286

  Total          250            132            7              389
  -------------- -------------- -------------- -------------- --------------

Consumption is likely to increase again in MY 2004/05 due to the cutback
in "grey" exports. GOZ re-introduced formal price controls in October
2001 in the run up to the crucial Presidential election. However, with
inflation rising to over 600% pa, the government has been unable to keep
up the demands of industry for frequent prices changes and, as a result,
price controls have fallen away. Some basic foodstuffs are now
"monitored" by GOZ to ensure that price increases are not in excess of
inflation.

# Exports

The export situation for the past two seasons is as follows:

  ----------------------- ----------------------- -----------------------
  1,000 metric tons       MY 2002/03              MY 2003/04 est.

  Refined sugar                                   

  Botswana                24                      20

  Angola                  8                       8

  Namibia                 16                      11

  South Africa            12                      4

  TOTAL                   60                      43

  Raw sugar                                       

  Namibia                 24                      26

  Portugal (SPS)          26                      26

  UK (ACP)                32                      31

  US (Quota)              12                      0

  Raw Total               94                      83

  Grand Total             154                     126
  ----------------------- ----------------------- -----------------------

There is some uncertainty over the future of the US sugar quota but
nothing definite has been reported to this office. The 2003/04 shipments
to the US did not occur.

  -------------------- ----------------- ------------------- -------------
  **Export Trade                                             
  Matrix**                                                   

                       Zimbabwe                              

                       Sugar                                 

  Time Period          Jan-Dec           Units:              Metric tons

  Exports for:         2002                                  **2003**

  U.S.                 11953             U.S.                0

  Others                                 Others              

  Angola               8000              Angola              7500

  Botswana             24165             Botswana            20160

  Namibia              40098             Namibia             37196

  Portugal             25800             Portugal            26200

  South Africa         11600             United Kingdom      31000

  UK                   32051             South Africa        4026

  Zambia               300                                    

  Losses               185                                    

                                                              

                                                              

  Total for Others     142199                                126082

  Others not Listed    0                                     0

  Grand Total          154152                                126082
  -------------------- ----------------- ------------------- -------------