322 words / 2 minute reading time

  • Pakistan is set to import sugar this season; we think up to 300k tonnes could arrive.
  • This follows a poor cane crop and strong export performance in the last two years, which has drawn down stocks.
  • The Government has just banned sugar exports and allowed duty-free sugar imports.

Pakistan to Import

  • We think that Pakistan will need to import sugar this season; the last time Pakistan imported was in 2010/11 season.
  • Sugar stocks are at three-year lows.
  • A PKR 10b (USD 64.8m) subsidy has been approved to tackle food inflation and duty-free sugar imports are now allowed.

Pakistani Whites Stocks to Use Ratio

undefined

What Drove the Recent Price Rally?  

  • We are expecting Pakistan produce 5.3m tonnes ofsugar this season, versus consumption at 5.5m tonnes.
  • However, local market rumours suggest that Pakistan could produce only 4.8m tonnes of white sugar this season.

Pakistan Could See Its Lowest Sugar Production in Eight Years

undefined
  • This would leave 600k tonne domestic deficit.

Pakistan Balance Swings to Deficit

undefined
  • Agricultural yield and sucrose recovery have been impacted by:
  1. Slightly-below-average rainfall in key sugarcane producing region Punjab, accounting for 70% of production and;
  2. Increased costs for agricultural inputs (fertilizer, raw materials, seeds and machinery) after the Government abolished subsidies and raised the General Sales Tax from 8% to 17%.
  • Rumours of poor agricultural yields mean farmers are capitalising on this, cane is currently being sold to mills up to 25% above the State-Advised Price (SAP) of PKR 192/40kg.

Pakistan’s Domestic Sugar Price

undefined
  • The export subsidy program for the past two seasons had driven exports volume of 2.6m tonnes over the available balance 1.5m tonnes, drawing Pakistan stocks down.

Pakistan Has Been an Active Exporter for Many Seasons

undefined

So, Where Could Pakistan Import From?  

  • Imports are notworkable at today’s prices by around USD 20/mt, even with the 0% duty rate.
  • We expect white sugar to be supplied from re-export refiners if and when import parity opens.

Fiona Tan

More from this author