Sugar industry: fair production, unfair dynamics

The new years begun, sugar crushing would end in a few months, and everyone is wondering what sugar crises will unfold this year.
There have been some discrepancies between the projected sugar production figures from the Ministry of Industries and Production (MoIP) and the Pakistan Sugar Mills Association (PSMA).
While the PSMA had earlier projected sugar production of about 3.2 million tons, and revised it again to 3.8 million tons at the beginning of this year, the MoIP estimated sugar production at 3.47 million tons in 2011.
Bearing in mind that there are carryover stocks of imported sugar with the TCP from last year, of about 0.3-0.4 million tons, and the approximate annual consumption of the commodity is 4.25 million tons in Pakistan, it seems that the country will be looking at a sufficient quantity of sugar availability for 2011.
There will be a possibility of importing between 0.5-0.7 million tons to complement further demand, but, as Chairman PSMA Javed Kayani rightly pointed out, imports should ideally be considered only after the crushing season is over and production figures are clearer, especially when international prices of white sugar are pretty high.
International prices of white sugar towered to $857 per ton on Wednesday, setting up a new record.
Does that spell a possibility of averting a sugar fiasco in 2011, since sugar stocks may be adequate? Not quite, say some sugar millers in the country.
"The sugar industry needs more regulation from the government, especially with regard to the movement of the sugar stock and its pricing. As long as the middlemen continue to wreak havoc with the situation and create price distortions, price crises are likely to persist," said Iskandar Khan, former Chairman, PSMA.
Allegedly, it is the middlemen because of whom the price of sugarcane, the main raw material for producing sugar, is almost double the support price of Rs125 per 40 kg. If the prices have been jacked up in the first step of sugar production, it is reasonable to expect the possibility of sugar prices staying at high levels, if not increase further.
The general rules of supply-demand do not seem to apply to the sugar industry of Pakistan. Other exogenous agents seem to be more important - the middlemen and price distortions. Lets see what the unique economic rules of this industry have to present in the remaining months of 2011 - fingers crossed.