Tongaat Hulett Ltd.’s raw sugar production from South Africa will fall at least 22 percent to the smallest in 15 years in the next planting season after the country’s worst drought since 1992.
Output of the sweetener will drop to below 421,000 metric tons, the lowest since at least 2000, Chief Executive Officer Peter Staude said in a phone interview Monday.
“Exactly how low it will be we don’t know at this stage but certainly in at least 15 years it’s the lowest number,” he said. “We’ve actually got more hectares that are under cane but we’ve had quite a severe 12 months in terms of rain conditions.”
Low rainfall over the turn of the year in the eastern province of KwaZulu-Natal and central Free State and North West provinces has hurt farmers of sugar and corn, of which South Africa is the continent’s biggest producer.
Sugar businesses such as Tongaat, Africa’s largest by market value, are also being squeezed by a global oversupply of the commodity, whose price has dropped 28 percent over the past year to $0.12 a pound, 65 percent lower than its peak in 2011.
Prices may reverse that trend this year as farmers in Brazil and India, the world’s biggest sugar producers, cut output, Staude said.
“When that happens, the price often reacts very quickly,” he said.