As the ECC announced a 0.2-million-tonne extension on sugar exports at the end of March, sugar exports for the month of April took to 67,000 MT – a decline of 37 percent month-on-month. Cumulatively, for the whole fiscal year, sugar exports are 191,000 MT – down 35 percent year-on-year and less than half of the targeted quota of 0.425 million tons. At this rate, it seems unlikely the quota will be met.
Earlier this month, BR Research shed light on the price trend of sugar in Pakistan and internationally (Read: “Pour some sugar on exports!” published on May 15, 2017). With sugar prices rebounding, the sugar mills became competitive and began exporting without subsidies. In fact, even the dollars earned from the latest round of exports reflect the rebound in international prices compared to last year’s exports.
In January 2017, the ECC granted a quota of 0.225 million tons for export until the end of March, and upon the insistence of the sugar mills, gave a further extension of 0.2 million tons till the end of this month. Recall that the current year’s production has been a record high seven million tonnes, as against domestic consumption of around five million tons. Thus, the surplus has been sitting idle, waiting to be exported.
More damaging to the economy than an un-exportable sugar surplus, however, is the growing popularity of sugarcane as a cash crop. Thanks to the support price, the area under sugarcane has been growing tremendously at the expense of cotton. Moreover, there are more than 90 sugar mills in the country, none of which are operating at their installed capacity. Sugar production is much higher than the country’s demand and, moreover, is not even an essential crop! The fix to these distortions is simple: either remove/lower the support price of sugarcane, or link the support price to sugar recovery.
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