Africa’s largest sugar producer, Illovo Sugar, is expecting sugar production to drop for the 2015/16 season due to the drought.
Illovo operates in all areas of sugar production, from growing sugar cane to milling, refining and packaging.
“Our annual replant programme has been impacted by the drought and together with a significant drop in cane yield, sugar production in the current 2015/16 season, as previously disclosed, will fall by more than 20 percent compared with the 586 000 tons produced last year,” company spokesman Chris Fitzgerald said.
The company is expecting to produce 468 800 tons of sugar this season, 117 200 tons less compared to the previous season.
During the last season Illovo reduced its cane production from 2.344 million tons to 2.013 million tons.
In its last set of financial results, Illovo had recorded a 37 percent decline in operating profits.
Its competitor, Tongaat Hulett, fared much better as it reported a 9.9 percent decline in operating profits.
South Africa has reported little rain over the last two years, and farmers have been negatively affected.
Despite the drought the company announced that it had enough stock in reserve to keep supplying the market with sugar.
The reserves might just save the consumer from paying high prices for sugar in stores for the time being, Fitzgerald said.
“Going forward pricing will be determined by annual supply and demand dynamics in the market,” he added.
Illovo shares were down 0.11 percent to close at R18.33 on the JSE yesterday, while Tongaat Hulett was up 3.24 percent to R92.50.