Sugar prices to remain high on fall in production

Leading manufacturer says decline in new stock, increase in production cost will affect rates

KARACHI:

The Pakistan Tehreek-e-Insaf (PTI) government may not succeed in bringing sugar prices down in the near future at least, as a leading sweetener producer said prices would remain high due to a notable drop in fresh production and a substantial increase in cost of production during the current season.

“… sugar prices in the market will naturally remain on the higher side,” JDW Sugar Mills, owned by PTI stalwart Jahangir Khan Tareen, said in a report to the Pakistan Stock Exchange on Feb 2.

“(The) government as usual wants the sugar industry to sell sugar at prices far below the actual production cost.”

Earlier, the commodity prices had fallen to an average of Rs80 per kg in the retail market nationwide in the second week of December following the start of sugarcane crushing season on time for the November-March season.

Prices have, however, once again shot up to Rs100 per kg in some parts of the country like Islamabad and Rawalpindi in the ongoing week, according to the PBS.

A few months ago, the commodity prices had shot to over Rs110 per kg in the retail market compared to around Rs80 per kg during March-May 2020. The government had said that the surge in prices had been due to market manipulation by the sugar mafia.

The sweetener was available at Rs55 per kg in December 2018. JDW Sugar Mills produces around 20% of the total production in the country.

Pakistan produced 5.2 million tons of sugar from 69.80 million tons of sugarcane in the previous fiscal year ended June 2020, it was learnt.

The producer said although the government had directed the state-owned company and private sector to import a total of 800,000 tons of refined and raw sugar to stabilise prices, the imports were financially unviable as prices were hovering at higher levels in the world market these days.

“Import at this stage will cost over Rs110 per kg with all applicable taxes,” the company said.

It elaborated that the cost of sugarcane had increased significantly and millers would pay an additional Rs100 billion to growers this year.

Besides, the average production of sugar from sugarcane has dropped as well.

The crushing season 2020-21 started on November 10, 2020 and on a group basis up to January 28, 2021, the sugar produced by the company stood at 463,892 tons with average sucrose (sugar) recovery of 9.60%, the company reported.

“In view of reduction in sugarcane crushing and continued fall in sucrose recoveries, the company on a group basis is expected to produce 13% less sugar over last year.

“Early start of crushing season by 15 to 20 days has caused reduction in sucrose recovery and a price war among sugar mills for the procurement of sugarcane is causing lower production and higher production cost,” it added.

For ongoing crushing season 2020-21, notified support prices of sugarcane have been revised to Rs200 per 40kgs from Rs190 in Punjab and Rs202 per 40kgs from Rs192 in Sindh “whereas actual sugarcane prices at which industry is procuring cane are much higher and range between Rs275 to Rs325 per 40kgs”.