Mid-November would have brought double celebration for people in Pakistan. Besides the Islamic ritual of Eid-ul-Azha, steps taken by the federal and provincial governments helped ease the prices of sugar by Rs20-30 per kg from the staggering Rs 120 per kg it had reached, at the beginning of the month.
And then came the time for sugarcane crushing- a process delayed until after Eid. With crushing came hopes that the sugar price rally may be contained, but the slow pace of crushing served as a dampener to any optimism one would have liked to look up to. Only a few mills in Punjab have begun crushing, while some in Sindh are operating under capacity. Slow harvesting by cane growers plausibly contributes to the delays in the crushing season due to firstly, the Eid holidays and the resultant non-availability of labour, and secondly, because growers only pace up their harvests once the demand from the mills starts rolling in.
But a critical reason cited by millers for the delay is the exorbitant cane price being demanded by growers. As opposed to the governments support price of Rs127 per maund (1maund = 37.32kgs), cane growers were demanding a minimum of Rs150 per maund from millers. Reluctant to pay the higher price, millers could not begin crushing on time.
Questioned about the said hike in cane prices, growers claimed that the prices they were asking for were quite justified given that millers sell them at such high rates. "Given a 10 percent recovery of sugar from sugarcane, even a rate of Rs150 per maund brings the cost of sugar for them to around Rs40 per kg at the most. But they sell it for much above that, even taking into account their own operational costs," a sugarcane grower told BR Research.
In addition, an increase in fertilizer prices and increasing costs of land preparation, transportation, harvesting, and various other processes involved in growing sugarcane, have also rendered the crop dearer.
It is obvious that the effect of artificially jacked up sugar prices at the retail level - which can be conveniently attributed to hoarders - affects other links in the sugar production chain as well.
Currently, locally produced sugar is being sold at around Rs80 per kg while imported sugar is being sold at around Rs70 per kg, the former being dearer because of its richer taste versus the nearly tasteless imported sugar, as per consumers claims.
Estimates for this years sugar production hover around 3.1-3.2 million tons, hinting that some quantity of the commodity may have to be imported this year as well. But its a tad early to comment on how much will have to be imported, and a better estimate can be gauged once the stock positions are clearer in a few months. The start of the season has not fared very well so far. One hopes the remainder of the year is not as tricky.
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