global F&A conference
i
Conference summary
Day 1 - the global
%r,
market place and
growth in emerg
ing markets
Poor Standard
What'sNewS Issue 7 November 2000
SB:That's not so much due to the growth
of niche markets, hut rather there is in-
ereasing transparency in the market itself.
The market is opening up, and people are
seeing the different ways of purchasing
sugar and other commodities.
WNS: Is this Internet related, or do you
agree with Jonathan Kingsman's percep-
tion of the net as a tooi?
ST: I don't think the Internet is really rele
vant at this time for sugar. Although, the
system Ejnar Knudsen talks about -
whereby vTraction partners can check
products sold via the Internet - can work
efficiently in many sectors. Jonathan
Kingsman points out that for sugar it's a
tooi that can help you do business. Even
James Proudlock of Sugaronline stresses
the roie of e-media in gathering and ana-
lyzing information, rather than using them
to buy and sell. I don't think anyone be-
lieves it will become a different, or rather
alternative, trading medium in the near fu
ture. People still have
to check the quality,
they want to see the
goods.
ADY: I think there's an-
other factor here. To
day, sugar is often just
one of 20 or so ingre-
dients used by a man-
ufacturer of other
products, as Cees
Menkhorst of Cosun
and Mats Andersson
of Danisco Sugar ex-
plain. Sugar is not as
important as it used to
be. Fair?
RB: Yes. Price levels
have been maintained
by efficiency in pro
duction, which has in-
creased dramatically,
not least through both seed quality and re-
sulting yields per acre - which the speakers
in the final section of the conference touch
on, especially Philippe Chatin of Novartis
and Martin Jager from Nutrinova. But if
we go back to the fact that consumers are
interested in other types of products, such
as organic sugar, then you're talking a
very different issue. In Australia, they've
Chairman Charles Groenhuijsen
discussing the politics ofGM
become very keen on traceability, an issue
covered by Frank Karsbergen of the Anty-
lum Group.
ST: If consumers want organic or brown
sugar, perhaps because they perceive these
products as 'healthy', and therefore more
desirable, then that's what the industry
will give them.
RB: It isn't just a consumer concern - the
industry will have to handle the repercus-
sions if consumers reject products - you
see that, for example, in the EU where
consumers are very nervous about addi-
tives and so on.
ADY: The organic food business is growing
25-30% a year. So growers who make the
investment - it takes 12 years to develop
organic production - can reap returns.
RB: This actually goes back to what Luis
Fernandez is saying. Everyone in this in
dustry has a raison d'être, they can justify
why they are there.
This is one of the fac
tors which makes
sugar very political.
Everyone has a very
good reason to con
tinue. I think they
will all pursue the
path that is most
suited to their own
social and economie
development.
ADY: Don't forget,
sugar is the oldest
commodity to be
traded internation-
ally. We've been do-
ing it for centuries.
RB: I suppose the real-
ity is that even though
it would not normally
be considered a 'sta-
ple', like rice and grains, but in emerging
markets, sugar is still an important source
of energy for many poor people. Some-
thing they desire, a luxury even, so it is
important from a political perspective to
ensure that sugar is available. In that re
spect, it acts like a staple with far-reaching
influence. Add to that its potential role in
power supply and co-generation, then
you'11 see just how important this com
modity is and why it will remain a politi
cal issue. Our industry cannot afford to
forget that.
4?
Although rather rhetorically entitled 'Did
Brazilian sugar production peak in
1999?', CEO of Copersucar Clésio Balbo's
presentation set the pace for the rest of the
conference. This was no PR exercise.
Balbo offered a deep analysis of the evolu-
tion in production over the past 20 years,
with long-term forecasts based on com-
pleted deregulation and increased focus on
the whole risk spectrum. Answering a re-
sounding 'yes' to the initial question, he
then went on to argue the case for the use
of ethanol/alcohol as a viable alternative
to oil, especially when the fossil fuel tops
the USD 25/barreI level. Already, the sugar
industry in Brazil generates enough 'green'
fuel to power 5% of the country's total
motor vehicles. 'What is exciting now,' he
commented, 'is the fact that other coun-
tries are looking at a blend of ethanol and
diesel. I'm talking Gasohol in the US, the
so-called FlexFuel vehicle being developed
in Sweden. Mexico is also looking at this
option, while major sugar producers like
Thailand, Australia, China and India are
all carrying out their own studies. The use
of this kind of "green" fuel is a response
to both Kyoto and volatile oil prices.'
Russia has no shortage of fossil fuels, but
that seems to offer little comfort to the
sugar industry there. Igor Khoudokormov,
CEO of Prodimex, had a somber story to
teil, although it's potentially good news
for exporters. In the past five years and in-
spite of a devastating crisis which has re-
duced even further an already poor Stan
dard of living, raw sugar imports have
increased three-fold. It is an increase Rus
sia can hardly sustain. The Russian sugar
lobby has been at pains to reduce volatil-
ity in the market. As a result, the »-
