Sugar

The State Bank of Pakistan (SBP) has asked authorised dealers (banks) to start processing applications for sugar exports. The SBP issued a circular that the process begins as per the instruction given by the Ministry of Commerce on July 2 for the export of 300,000 tonnes of sugar. Sugar mills are not satisfied with the limit of 300,000 tonnes set by the Economic Coordination Committee of the cabinet. They claim there is a glut-like situation in the domestic market. They demand that the limit on the export volume of sugar should be enhanced. Sugar prices recently increased in the domestic market as some parts of the country suffered shortages of the commodity. The SBP advised the authorised dealers to forward the requests of sugar mills to the director of the central bank Foreign Exchange Operations Department (FEOD) for approval.

Brazil center-south region produced 3.41 million tonnes of sugar in the second half of July, the most for a 15-day period, as very dry weather allowed mills to work around the clock in the world largest cane belt. Mills allocated 50.33 percent of the cane to sugar production in the second half of July, versus 48.05 percent a year earlier.

U.S. beet sugar production for the 2017/18 August-July crop year is increased by 89,500 short tons, raw value (STRV) to 5.131 million based on area and sugarbeet yield forecasts made by NASS in Crop Production report. Early-season production occurring in August and September is projected to constitute 10.7 percent of the total. Revised fiscal 2016/17 production of 4.998 million STRV incorporates the updated early season production. The projection for fiscal 2017/18 is 5.068 million STRV, up 80,000 from last month. Although NASS forecasts reduced area harvested for both Florida and Louisiana sugarcane, forecast yields in both states are up strongly over last year. Florida cane sugar production for 2017/18 is increased by 126,000 STRV to 2.126 million and Louisiana is increased by 26,000 STRV to 1.626 million. USDA increased the 2016/17 raw sugar tariff-rate quota (TRQ) by 269,724 STRV and extended the time under which the sugar can enter by an additional month to October 31, in the 2017/18 fiscal year. The Office of the U.S. Trade Representative allocated this amount and reallocated existing, but yet unshipped, raw sugar TRQ among supplying countries. It is estimated that an additional 148,470 STRV of TRQ raw sugar will enter in 2016/17 and 161,499 STRV in 2017/18. Sugar imported from Mexico is projected to increase by 103,932 STRV in 2016/17 after the Commerce Department increased the 2016/17 Export Limit but is reduced by nearly that same amount in 2017/18 due to lower beginning stocks in Mexico. Re-export imports of 25,000 STRV previously estimated to enter in 2016/17 are now projected to enter in 2017/18. High-tier tariff imports for 2016/17 are reduced to 10,000 STRV, based on the pace to date. Mexico 2016/17 sugar imports and deliveries for consumption are up fractionally based on the pace to date. Deliveries in 2017/18 are increased marginally to keep sweetener consumption per capita the same as in 2016/17. Exports to the United States in 2016/17 are increased by 88,949 MT to match the Export Limit increase made by the Commerce Department. These adjustments for 2016/17 imply a reduction in ending stocks of 86,577 MT. Exports to the United States for 2017/18 are residually projected at 1.466 million MT, an amount 94,091 lower than projected last month.

Prices of sugar fell in the key wholesale markets of Delhi because of weak demand from bulk buyers. Millers have lowered prices of sugar to trigger demand. Sugar prices in Mumbai, however, were steady in a thin trade. Buyers are in a wait-and-watch mode. Everyone is waiting for government action. The government is likely to allow import of 300,000-500,000 tonne of sugar at zero duty to augment supply during the upcoming festival season.

The time may be ripe to implement the Rangarajan formula for sugarcane pricing, read a central government letter to Uttar Pradesh in July, sking it to do away with the state-advised cane price. While the government and sugar industry seem to be on the same page in this regard, the move is unlikely to go down well with the state cane farmers. Farmers across the country, including those in Uttar Pradesh, have been demanding higher prices for their crops due to rising input costs. Although the Centre fixes cane price every year, some states like Uttar Pradesh, have been typically fixing a higher price for cane over the years to woo farmers, who comprise a chunk of the vote bank. The revenue-sharing formula recommended by the Rangarajan committee, set up during the United Progressive Alliance regime, entitles farmers to a price equivalent to 75% of the mills average realisation from sale of sugar and its by-products.

Nestle R&D Centre Singapore is committed to cutting down the sugar and salt content in its products by 2020. The food and beverage company is looking at reducing the sugar content by five per cent and salt by 10 per cent within the next three years.

Despite huge stock in the country, the rates of sugar in wholesale market have increased by around Rs500 per 50kg during the last week due to limited sugar supply from the mills. As a result, the prices in retail market have jumped by Rs5 to Rs60 per kg from earlier rate of Rs55 per kg. Presently, no shopkeeper is following the official rate of sugar to sell the commodity at Rs55 per kg with some of the retailers refusing to sell white sweetener. The rates have surged because the mills had put an unannounced ban on supply in protest against the government for not allowing export of sugar. He said that the dealers could not lift sugar from the mills despite an upward surge in its prices.

Sugar futures declined, extending losses for a crop that has been weighed down by abundant harvest prospects in Brazil. Raw sugar for October delivery declined 2.9% to settle at 13.24 cents a pound, extending its losses to the eighth consecutive session on the ICE Futures U.S. exchange. The market expected record 50.69 million tons of cane was crushed in the second half of July in central-south Brazil, up 2.6% on the year. Sugar is being pressured because the harvest has been going full-speed for two months, which is the longest stretch of dry weather in at least four years.

Prices of sugar were largely unchanged in the key wholesale markets of the country due to lacklustre trade. Thin trade in the market can be attributed to the fear of government action to ensure enough supplies in the domestic market. The government is likely to allow import of 300,000-500,000 tonne sugar at zero duty to augment supply during the upcoming festival season.

There are sufficient sugar stocks in India to take the country through the next sugar marketing year. This came amid reports that the government is contemplating another round of sugar imports to meet the anticipated high demand during the upcoming festival season. Sugar production fell below consumption in the 2016-17 marketing year. This had led to a surge in sugar prices, forcing the government to direct mills to maintain demand-supply balance and curtail the prices. The current prices are not higher than the previous year. The union government, which had increased the import duty on sugar to 50 per cent in July, is reportedly contemplating cutting it to 25 per cent and allowing import of sugar to augment supplies during the festival season.

Pakistan is expected to import a record 1.6 million tonne soybean in 2016-17 and around 2 million tonne in 2017-18. Higher demand for soybean from Pakistan is seen coming from poultry feed sector in the country. The country soy oil import is expected to be around 200,000 tonne in 2016-17 compared with 184,000 tonne in 2015-16. For Soy oil 2017-18, import is pegged at 250,000 tonne. Pakistan palm oil import is pegged at 3.0 million tonne in 2016-17 against 2.7 million tonne in 2015-16, while palm oil import is seen at 3.1 million tonne in 2017-18. Pakistan is one of the largest edible oil importers in the world.

India is planning to allow additional 200,000 tonnes of duty-free sugar imports, a government source said on Tuesday, as production fell below consumption in 2016/17 marketing year ending on Sept. 30, according to Reuters. The world’s biggest sugar consumer had earlier allowed duty-free imports of 500,000 tonnes of the sweetener. The country’s opening sugar stock for 2017/18 season starting from Oct. 1 are likely to be 4 million tonnes, down sharply from 7.7 million tonnes this year, the source, who declined to be named, said. Separately, India is planning to raise import tax on vegetable oils like palm oil, soyoil and sunflower oil, the source added.

The government of Jharkhand has floated a tender to buy 2,700 tonne white crystal sugar via NCDEX e-Markets Ltd, the spot arm of National Commodity and Derivatives Exchange. The Department of Food, Public Distribution and Consumer Affairs of Jharkhand seeks to buy ISS Grade S-30 sugar on Aug 17.

Prices of sugar have risen recently due to the regional imbalance in availability of the sweetener. However, taking the sugar production of 2016-17 (Oct-Sep) and the carryover stock of 7.7 million tonne into account, there is sufficient availability of the commodity to meet the domestic demand. Mills across the country are estimated to have produced about 20.3 million tonne sugar in 2016-17, sharply down from 25.1 million tonne produced in 2015-16. Wholesale sugar prices in Delhi had shot up to a record high of 41 rupees a kg in July as stockists rushed to build inventory, which they had liquidated ahead of the rollout of goods and service tax. Though wholesale prices have eased since then to about 39.50 rupees, retail prices continue to hover at 43-45 rupees. Prices are expected to rise again as supplies are seen tight this season and demand is seen increasing ahead of the festival season.

The government is likely to allow import of 300,000-500,000 tonne sugar at a concessional import duty of 25% to augment supply during the upcoming festival season. The proposal to this effect (allowing import at 25% import duty) might be put up to the Cabinet for approval later this week. Government was planning to tweak the conditions of advance licence scheme giving more time to sugar mills and refineries to fulfil the obligation of re-exports.

Prices of sugar remained largely flat across markets barring north India, where prices inched up due to improved demand from north-eastern states. Most of the demand is coming from north-eastern states as markets in the western region were largely shut due to Raksha Bandhan festival and Lunar eclipse, which is considered inauspicious among traders. Government warning of re-imposing stock limits if prices rise further seems to have kept traders cautious and away from aggressive trade.