|43rd Annual General Meeting
|18th November 2008
It is an honour to present to the members, on behalf of the Central Executive
Committee, annual report of the Pakistan Sugar Mills Association for the
year ended September 30, 2008. It has been a year of some excellence and
certain short comings, as usual. Being absolutely an agro-cum-rural based,
besides seasonal, sugar industry has been portraying peculiar profile
of it. This report deals with some key issues which have for long dominated
this trend and now need to be addressed, as early as possible. PSMA wants,
being concerned stakeholder to place critical issues in focus to facilitate
their resolution. This has emerged as a pressing need and, therefore,
quite imperative to break impasse. As national sugar industry holds immense
inherent potentials for growth, these shall be efficiently exploited.
It is in the interest of the stakeholders and the national economy.
Sugar year 2007-08 heralded happy tidings by setting a record production
volume of sugarcane at 63.920 million tonnes, sugarcane crushing at 52.757
million tonnes, sugar production at 4.737 million tonnes, similarly extending
proportionate increase in production of its four main by-products, namely,
bagasse, molasses, filter mud and crop wastes. From each of these four
by-products, as many as 40 plus derivatives can be made. No other crop
or commodity offers scope for such a sizeable number of derivatives.
From bagasse can be made 20 derivatives, including generation of renewable
energy, paper and board, packing materials etc. Molasses processing can
give 15 derivatives, inclusive of ethanol as energy source, cattle feed,
viscose yarn, bakers’ yeast etc. Filter mud is useful as fertilizer.
Crop waste useful to make five derivatives, including power generation.
Exploiting these resources into value-added products is awaiting attention.
A record production has indeed been a gratifying feature of 2007-08
season. This deserves analysis both on national and zonal levels, for
comprehension so as to evolve more material input for solving problems.
We look at 10 years record of sugarcane production in Pakistan, in terms
of area under the crop, yield and recovery which represent sugar production
|Crop area, yield and in effect sugarcane production portray
fluctuating fortunes. Area fared in range from 907 thousand hectare (2005-06)
to 1241 thousand hectare (in 2007-08) variance at 36.82% has indeed been
Yield fell in range from 47.33 tonnes/hectare (in 2003-04) to 53.12 tonnes/hectare
(in 2006-07), having 12.23% variance which makes it noticeable. Sugarcane
production was in range form 44,099 thousand tonnes (in 2000-01) to 63,920
thousand tonnes (in 2007-08) giving variance of 44.94%, indeed significant.
A record at 63.920 million tonnes sugarcane crop, having no use other
than of its processing by the national sugar industry, its supplies to
sugar mills soared to 52.757 (40.484) million tonnes, forming 82.53 (73.72)%
of total output level. Sugar recovery improved to 8.98 (8.70) % contributed
further in making the highest ever at 4.741 (3.516) million tonnes of
|Sugar crushing fared in range from 28.983 million tonnes
(of 1999-2000) to 52.75 million tonnes (of 2007-08), denoting a big variation
of 82.2%. Sugar recovery rate was in range form 8.21% (of 1998-99) to 9.15%
(in 2003-04), making significant at 0.94%. Sugar production in range from
2.415 million tonnes (of 1999-2000) to 4.741 million tonnes (in 2007-08),
made a sizeable variance of 96.14%. Likewise, sugarcane supplies to industry
for processing created range band form 62.07% (of 1999-2000) to 82.53% (of
2007-08). It made a marked variance of 32.96%.
These figures underline significant, fluctuations in the relevant production
parameters. This reflects inconsistency, derailing a steady, sustainable
growth flow inevitable for managing economic gains. This precisely points
out absence of a precise policy format fairly conceived and designed,
to be in place. Unless it is made available, sugar segment will stay locked
in deceptive dilemma, which tends to deny due benefits.
During 2007-08 season 79(77) sugar mills were operational. Sugarcane
crushing on an average by mills was 66,773 (52,555). Production of sugar
on average per mills at 59,963 (45,662) tonnes was higher by 31.31%. Higher
production level was not as much rewarding, which by normal feature of
‘economies of scale’ should have been more rewarding. National
sugar industry, by crushing at 52.751 million tonnes during 2007-08 season
achieved 2.661 (1.911) million tonnes of molasses by-product, at 5.04(4.71)%
A profound policy framework, taking care of sugar and derivatives of
its key by-products is needed. Now is the time, to make move in this direction.
|COST- PRICE DISEQUIBRIUM
|A record sugar production of 2007-08 did not cast a desired
wholesome influence on bottom line of the sugar industry, contrary to a
general impression of ‘more the production more the profit.’
This tendency does not make a match with sugar segment due to markedly different
traits governing sugar manufacturing and marketing. Sugar production takes
place in about 110 days. Sugar sales stretch out to 365 plus days in event
of larger production rollout, a record of it taken place during 2007-08,
making sales further extended. This peculiar situation is attributable to
inelastic demand characteristic of sugar. Sugar consumption remains steady,
with normal increase by population and income growth. Sugar purchase by
public tends to be in small quantity of packet sizes, not in bulk. Inflationary
trend in the economy dented disposable income part, which in turn suppressed
to an extend demand element of population increase as well. Besides, carry
forward to review year sugar stock at 445,399 tonnes made aggregate sugar
supply volume hefty at 5.182 million tonnes.
Another element in price imbalance, rather distortion, carrying adverse
influence on sugar industry’s bottom line has been huge at about
72% being cost component of sugarcane in sugar production. Besides provincial
governments fix sugarcane minimum price, usually endorsed by the Federal
Provincial authorities carry tilt in favour of farmers, while federal
functionaries keep concern for consumers about sugar price. This leaves
sugar industry alone, grinded by such contrasting policy pursuit as a
permanent feature being followed. There has been no rationale in price
tag of sugarcane and sugar, exposing the sugar industry to heavy hazards.
As a result fixed cost component of sugar manufacturing stays above 90%,
leaving fraction to chase for economies of scale by increased production
PSMA has been agitating the problem of price imbalance on lacking linkage
between sugarcane and sugar cost/price equation, and reiterating to take
up this case with care jointly by the provincial and federal authorities.
This time, it received a hearing, followed by a hesitant effort to reconcile
the issue. Cost of sugar production was critically assessed for ‘striking’
some equilibrium. A Committee of Federal Government Secretaries from three
Ministries of Finance, Industry and Commerce was formed for the purpose.
It worked out ex-mills sugar price at Rs.29,000/tonnes to safeguard sugar
industrial segment. However, over supply of sugar, compounded by a short
time prescribed for payment to sugarcane farmers, 15 days from the supplies,
compelled as always happened, to sugar industry desperate sales during
the crushing campaign, to care for cash flows for farmer’s payments.
This has been a distinct feature of sugar industry, so it was always being
brought to authorities’ attention but has been of no avail. Sugar
prices fared through out the season markedly subdued, trailing far below
the safe price level earmarked. Month-wise wholesales sugar price, containing
16% sales tax, besides transport cost, trade margin etc. has been as given
hereunder. This information provides a clear picture of the crisis consistently
over-riding the national sugar industry.
|This proved distress-laden situation which prevailed. The
Government of Pakistan, however, agreed to procure 400,000 tonnes sugar.
Its purchase was made through Trading Corporation of Pakistan. However,
the ‘rescue’ design was inadequate and so incompatible. Procurement
by TCP was through tender system for competitive price. This did not serve
the purpose it was designed. Had it been at assessed price of Rs.29,000/tonnes,
the sugar industry could have safe sales to the extent of sugar procured.
The quantity picked fell short of 10% of the output. PSMA had some solace
that its proposal of carrying strategic/buffer stock by the Government was
acknowledged and acted upon. We are hopeful that the system brought on track
will be maintained, improved and strengthen to deliver. Developing countries,
like Pakistan, are often exposed to uncertainty of the crop size. It needs
to hold strategic stocks of food stuff to serve society as a safety valve.
INTENSIVE CROPPING INEVITABLE
Sugarcane production figures of the past decade, in it output level above
50 million tonnes of sugarcane for five years, seems attractive. This
achievement has largely been by more hectares brought under the crop.
Yield has been above 50 tonnes/hectare but for three years.
Pakistan, with on an average one million hectares under sugarcane crop
holds potentials to double sugarcane and sugar production by improvement
in quality of sugarcane and its marketing, particularly of supply schedule
ensuring instant crushing of sugarcane on its harvesting.
Potentials exist of producing more than twice the record sugar production
at 4.737 million tonnes reached in 2007-08 season. It demands intensive
crop pattern, to be inducted by improvement in the existing system. Greater
dynamics can be infused in this regard by setting up of a sugarcane research
institute. It is as imperative as important, more so as challenges on
economic front in global circuit are increasing day by day.
Each country cultivating sugarcane has to create a research and development
institute of its own, to evolve new varieties, suitable to their soil
and climate, in brief echology. Seeds can not be brought from abroad.
Institutional structure is imperative for evolving seed/fuzz, its multiplication
and distribution. Besides the institute shall become a centre of excellence
for training of manpower in farms and factories engaged in sugarcane cultivation
and processing respectively. Creation of such a superb and inevitable
institutional set up shall not cause strain on government revenues. Huge
funds running into billions of rupees contributed by mandatory requirement
in form of sugarcane cess for decades by the sugar industry and sugarcane
farmers, remain unutilized with Governments of the Punjab, Sindh and NWFP
Provinces. Symbolic structures do exit in the public sector in all the
three provinces but have been good for being entities. Their rise and
sustainable future squarely lies with the stakeholders, being beneficiaries
and having raised funds. Sugarcane cess fund carries two specific usage,
creating ‘pucca’ road network connecting sugarcane farms with
sugar mills and undertake useful research and development work about sugarcane
varieties and allied areas.
PSMA has identified ideal location for sugarcane research and development
institute, being Gharo in Sindh, by its being close to Arabian Sea. PSMA
prepared a study about cost and benefits of the institution. PSMA has
approached all the concerned authorities, at Federal and Provincial levels,
for release of funds so that the institutional structure is earnestly
brought into existence and pressed into functioning.
Once the institutional structure comes into being, Pakistan shall have
a steady, sustainable growth dynamics in sugarcane and sugar production,
on lively intensive pattern of crop cultivation. On the present average
one million hectare, sugarcane crop size can be more than doubled the
latest record level achieved of 63.920 million tonnes. No extra land will
Similarly sugar production of a record at 4.737 million tonnes achieved
at 8.89% recovery for 2007-08 season will be more than doubled in a short
time. Sugar industry presently holds sugarcane crushing capacity considerably
more than its record crushing of 52.757 million tonnes during 2007-08
season. No dose of fresh capital outlay is required. Sugar industry is
now running on average of 110 days which makes it short for economic uplift.
Standard period of its working has been spelt out at 150 days. It can
be extended to 210 days by varietals development of sugarcane of early,
mid term and late maturities to keep sugar industry operational for longer,
so as to provide it economic viability, serving the national interests
ZONAL VIEW, REVIEW
Information and analysis of sugar industry on national level, on modest
macro-scale, in aggregate is reflection of performance of three zonal
segments. By and large, no material difference is discernable on end-result
between national and zonal levels. This, nevertheless, implies to have
at a glance on important features of zonal performances, with relevant
observations of priority points.
Sugarcane was cultivated on 827 (712) thousand hectare, higher by 16.15%,
setting a record. Season 2000-01 with 581 thousand hectares fared the
lowest of the latest decade. Variance in range at 246 thousand hectare
i.e. 42.34% has obviously been significant.
Sugarcane production at 18.793 (12.592) million tonnes, up 49.24% was
also a record, so highest of the past decade. The lowest sugarcane production
was at 26.700 million tonnes of 2000-01, coinciding with area under the
crop being at the lowest. Yield at 49 (52.74) tonnes/hectare dropped by
7.10% has emerged a case of concern, the lowest at 40.64 hectare/tonnes
was struck in 1999-2000.
Sugarcane crushing at 33.045 (26.584) million tonnes, up 24.30% was note
worthy. It was the best of the past decade. The lowest at 18.068 million
tonnes harvest was in 1999-2000 season. Sugarcane crushing fared fine
at 81.98 (70.81)% of the crop, not on top in the decade. It was 83.53
in 2002-03 and the lowest run was 60.88% in 1999-2000. Sugarcane production
at 2.949 (2.268) million tonnes, up admirable 31.12% was the best ever
achieved. Sugar production fared in range of 1.316 million tonnes being
the lowest in 1999-2000 season. Variance of 124% was indeed huge. It gives
good reading by rise registered. The momentum needs to be maintained for
multiple benefits of it.
|Sugar recovery rate at 8.92 (8.53)%, modestly up was the
second best set during the past decade, the highest being 9.09% of 2003-04
and the lowest marked at 7.80% of 1998-99.
During 2007 season 42 (41) mills were functional. On average a mills sugarcane
crushing increased to 786,757 (684,381) tonnes, up 21.34%. Sugar production
was up 26.91% to 70,202 (55,315) tonnes. On average capacity utilization
per mills fared better but not at an optimum level, leaving much scope
for further improvement. Molasses output was higher by 31.50% at 1.607
(1.222) million tonnes on 4.86 (4.60)% recovery. Higher molasses recovery
means proportionately lower sugar output. This reflects upon quality of
sugarcane, besides supply system and a large crop impact.
Sugarcane cultivation spread over 308(214) thousand hectare, up 43.92%,
was a record. Lowest hit at 183 thousand hectare was in 2005-06. Sugarcane
harvest at 18.793 (12.592) million tonnes, up 49.24%, was also a record,
while the lowest fared at 9.357 million tonnes in 2004-05. This had happened
due to yield then touched the lowest at 43.52 tonnes/hectare. The highest
of the decade at 62.96 tonnes/hectare was fetched in 1998-99. This feature
reflects marked fluctuation in sugarcane quality, besides disruptions
in supply system.
|Sugarcane crushing at 16.737 (11.627) million tonnes was
at its best by giving an inspiring increase of 43.94%. The lowest of the
past decade was at 7.915 million tonnes hit in 2004-05. Sugar rollout at
1.561 (1.062) million tonnes, higher by 46.98% and highest of the decade,
was exciting, more so, it was attained by the modest sugar recovery rate
of 9.33%, falling behind 9.83% of 2005-06 and 9.53% of 2004-05. Sugar recovery
at 8.96% was the lowest in 1998-99. Barring this, recovery rate has been
above nine percent. Scope of improving upon it to over double digit existed,
calling for attention to its exploits, certainly to be in interest of the
stakeholders and the national economy.
Sugarcane crushing formed 89.05 (92.80)% of the crop size, ranking the
third best of the decade. Highest of it was in the preceding season and
the second best at 89.98% in 2002-03. The number of sugar mills functional
remain unchanged at 29 units. On average sugarcane crushing per mills
notched up by 34.94% to 577, 138 (400,930) tonnes. Sugar production per
unit moved impressively up by 46.96% to 53,841(36,635) tonnes. However,
capacity utilized was not at the desirable optimum level. Working was
contained to net 125 days with a record sugarcane crushing so far, obviously
providing a good scope to improve on the time scale, similarly on supply
Molasses production of 889,566 (578,833) tonnes, up 53.68%, was achieved
by recovery rate higher at 5.31 (4.98)%. It proportionately reduced sugar
production. Reason for it tend to be higher volume of sugarcane besides
hitches associated in supply schedules.
NORTH WEST FRONTIER ZONE:
NWFP zonal working bore a little variance during the 2007-08 season over
the previous. Sugarcane cultivation was on 105,000 (106,400) hectare,
rolling out production of 4.800 (4.792) million tonnes, with yield being
constant at 45.11 tonnes/hectare. Sugarcane area and crop size fared in
narrow range during the past decade. Highest crop harvest at 5.049 million
tonnes was in 2002-03 and the lowest at 4.100 million tonnes in 2005-06.
A notable feature was sugarcane supplies to the organized sugar industry
segment improving to 62.11 (47.03)% of the crop size, increasing sugarcane
processing to 2.976(2.579) million tonnes, up 15.38%. Sugar production
went up by 17.62% to 226,750 (192,777) tonnes. Sugar recovery rate dropped
to 7.62 (8.54)%. It fared the second lowest of the decade. Highest at
8.59% was in 2004-05 and the lowest at 7.22% in 2000-01
|During the review season 8(7) sugar mills were functional.
On average per mills, sugarcane crushing increased insignificant by 0.96%
to 372,045 (368,485) tonnes. Sugar production was 28,344 (27,540) tonnes,
up meager 2.91%. This zone holds promising potentials for growth. This is
checked and prevented by predominance of unorganized ‘gur’ making
segment. PSMA and its NWFP zone have been pointing out the problem of tax
free status of gur. This problem impacting adversely investments made in
the industry and so also the federal and provincial revenues. Hopefully
this problem shall be addressed soon.
One sugar mill sliced 64,095 (83,580) tonnes of sugar beet, produced
5,532 (7,143) tonnes of sugar, at recovery unchanged 9.04%. Molasses production
was 2,576 (2,973) tonnes.
Molasses has conventionally been considered a key by-product of Pakistan
sugar industry. Substantial part of its production was normally geared
for export. Domestic consumption, in context of production, used to be
just peanuts. However, molasses has been progressively replaced by ethanol
from 2002 and a steady increase. A record sugarcane harvest and crushing
during 2007-08 season gave molasses production at 2.661 million tonnes,
being the highest. This created a space for molasses exports jump to 911,065
(339,595) tonnes becoming the best of the past three years. Replacement
of molasses exports by ethanol has been a right pursuit, of having value-added
forex revenues. Domestic market for molasses had been small all along.
Similar situation unfortunately has been found for ethanol. Hopefully,
it shall be short lived. Rising exports of ethanol provide clear credentials
of the products, being useful in domestic market as well, by its acceptability
abroad. This fact shall do away apprehensions, if any, about its utility
as a gasoline supplement.
Molasses market in the country has been very limited for want of its
diversification into value-added products. Its use in the past, and now
for ethanol, was 1989 and actively from 1994 confined to animal feed and
processing of it by four old distillery units.
|As ethanol holds positive prospects of domestic use and growth
in global market, it needs concerted efforts to keep dynamics. Simultaneously
it is desirable to keep molasses market abroad lively alive and online.
This can be achieved by augmenting sugarcane production, as emphasized earlier,
by intensive sugarcane cultivation method. Scope in both spheres is sizeable
and need to be exploited in earnest.
Ethanol is a renewable source of fuel. Prices of gasoline registered
a steep increase on a faster track, during the past five years, beginning
form 2004. The phenomenon of consistently rising price made ethanol more
popular as gasoline mix in several counties, leaving Pakistan still in
lurch. The Government of Pakistan have in principle agreed and decided
to promote ethanol as gasoline mix to begin with at five percent and increase
it to 10% on faster track. Resistance to it is being consistently made
on flimsy grounds. Initial 5% inter mix of ethanol with gasoline shall
not be made an issue, but pave the way for its steady gear up intermix
to 10%. PSMA has been persistently pursuing, urging and advocating this
matter for prompt implementation.
During 2007-08 season, 18 of the 22 functional distillery units were
attached with sugar units. Three more are online to join the foray. Some
more are to follow the suit. Prospects of ethanol tend to be tempting,
Ethanol production and its almost entire export reflect a rising trend
in store. Its growth potentials are promising.
|Ethanol production, spearheaded by its export, registered
an impressive growth. It was 34,888 tonnes in 2002 and rose to more than
300,000 tonnes in 2008. It has been an impressive increase, translating
into average growth of 125% a year. Eighteen distilleries with sugar industry
segment hold capacity to produce 2.300 million litres of ethanol a day.
Effective capacity, however, remains variable by quantity and quality of
sugarcane available to sugar industry as these carry direct influence on
by-products, including molasses.
Economy of Pakistan for the past several year has been suffering power
shortage, assessed to the tune of 5,000 MW. It has been due to consistent
increase in energy requirement outpacing generation, sharply contrasted
by no capacity creation taken place for power generation. In view hydel
power generation less expensive though, no new project has been set up.
Efficiency of the existing dams eroded by silting and reduced water supplies.
This phenomenon pushed to increasing reliance on thermal power generation,
being considerably expensive, due to steep increase in fuel prices. It
compelled to look eagerly for renewable-cum-sustainable source of power
generation. Sugar industry merits in category of renewal source of power.
Pakistan Sugar Mills Association has been pursing this matter with the
Federal Government since 1994 and actively since. Sugar industry being
functional during November to March period has capability to generate
power in excess of its own requirement to operate the mills. Its working
to be during winter months, while hydle power supply tends to be at the
lowest level, acute power shortage is being felt in this period. Sugar
industry can generate now up to 2240 MW of electricity by using sugarcane
by-product bagasse, besides distillery spent wash. Each sugar mills can
generate extra electricity by using bagasse. Sugarcane has been acknowledged
as renewable, besides sustainable source of energy in several countries,
by use of ethanol and bio-fuel of bagasse. The bottleneck in its energizing
to combat energy shortage, specially in typical acute scarcity time of
winter season has been not yet won acceptance of authorities for a competitive
tariff as Independent Powers Projects (IPPs) By economics parameters and
logical dispense, energy being energy, of similar use, shall get an uniform
tariff. PSMA has given presentation on it, dealing with scope and feasibility
study, with economic benefits of acquiring electricity from sugar industry.
In principle the project details provided have been acknowledged, leaving
tariff factor under consideration. This restraint on sugar industry hopefully
will soon settle down, enabling the national sugar industry with its 79
performing units, located in three provinces. All the mills in rural areas,
strategically placed, play its role resuming to provide electricity making
the oasis already created by it to become sparkling and contributing more
PROBLEMS, PROGNOSIS, SOLUTION
Basic problem of sugar industry identified by consultations among the
stakeholders has been lack of linkage between sugarcane and sugar prices.
Sugarcane minimum price is being set by provincial governments. Sugar
price stays afloat, left to market forces set it! Sugarcane processing
spell is seasonal, production takes place on average in about 110 days.
Sugar sales spread over a year, may be above it, by inelastic demand.
Besides, sugar industry is directed to make payment to farmers in a week
of supplies of sugarcane. How to manage finances of inventory piling up
each month at least by 17% of production rollout and accumulating to 68%
by the end of spell and simultaneously payout within one week of supplies
of sugarcane, which forms above 72% of sugar production cost. This situation
compels for desperate sugar sales by the industry, often in advance and
more so during
sugarcane crushing period to have cash flow! This issue has always been
brought to the authorities attention, but solution has not yet come off.
During the review 2007-08, season certain move ahead took place. The
Federal Government prevailed to hold minimum price of 2006-07 season unchanged
for 2007-08 season.
MINIMUM SUGARCANE PRICE PER 40KG
Season 2007-08 2006-07
Punjab Rs. 60/= 60/=
Sindh Rs. 67/= 67/63*/=
NWFP Rs. 65/= 65/= (*Revised)
Besides, the Federal Government worked out sugar price to be Rs.29000/tonne
ex-factory, based on given minimum sugarcane price and related other costs
of production. However, mechanism was not structured that be in place
to ensure sugar price as determined. This left sugar industry in usual
distress. PSMA persevered to have some system in place that sugar price,
as worked out, was assured. At best, the Federal Government procured 527,949
tonnes of sugar through the Trading Corporation of Pakistan, but this
was neither made during the sugarcane crushing spell as envisaged nor
at the break-even price of Rs.29000/tonnes worked out. TCP purchases were
by tender pushing sugar industry in same shape as in open market. Hence,
no desired support could be had of it to save national sugar industry
form pinching impact of the policy defects! In desperate sale for liquidity,
mills exported about 277,339 tonnes.
PSMA hopes that a positive view of it will lead to progress, so as to
put in place proper modalities to protect sugar industry from perils but
place it in sound shape so that it contributes to the national economy
to the full extent of its huge potentials.
USES OF ETHANOL AS GASOLINE MIX:
PSMA has been pursuing this case for years. In principle, five percent
use of ethanol as gasoline mix has been accepted. However, modalities
are being worked out for its implementation. Once the preset impasse created
by other interests is overcome, ethanol use is bound to gather a steady
PSMA proactively took up this matter to address the problem of acute
huge at about 5000MW power shortfall being faced by the country, much
adversely affecting the national economy. Sugar industry holds potentials
to provide 2400MW of power. Each sugar mills is capable to generate surplus
power by using bagasse. Power to be available during critical
winter months, the time of sugar industry’s working, while hydle
power goes to the lowest ebb, shall prove exceptionally convenient.
PSMA is perusing with the authorities to give a standard tariff to the
sugar mills so that co-generation could be started immediately.
Due to seasonal short term functioning, sugar industry’s financial
position stays vulnerable, as sugar industry has to procure the raw material
in 140 days and hold the finished product for 360 days. Thus creating
huge mismatch of financial resources.
Sugar is an energy food item. Its sustainable availability is essential.
Besides, there must be a firm foothold in exports, rather succumb, time
and again, to imports. Four by-products rollout of sugar production and
their 40 derivatives offer huge potentials to exploit. For this, increase
in sugar production is prerequisite and essentially to be by intensive
crop pattern, pursuit and practices. This can be achieved on having a
seed evolving and breeding research institute. Proposal of PSMA for setting
up such an institute at Gharo in Sindh and release of cess funds need
Government attention and prompt approval, so that this vital project is
taken in hand at the earliest.
As expected, since sugarcane production trend is of cyclic tendency and
it has not been broken as yet, it is essential that steady sustainable
growth in sugarcane and sugar production is attained. Sugarcane crop is
poised to be lower during the ensuring 2008-09 season. The first estimate
of the crop size drawn officially portrays the position to bring distinctly
lower sugarcane and similarly sugar output.
|Sugarcane production is estimated at 53.498 million tonnes,
down by 16.31% from 63.920 million tonnes of 2008-09. Yield is likely to
remain in narrow range of 51.5 (50) tonnes/hectare. At an average of 75%
sugarcane, flow to sugar mills for crushing, to be 40.124 million tonnes
and average recovery of 8.6%, sugar production may be 3.451 million tonnes,
provided the first estimate stays put, chances of which seem not firm. However,
with stocks of about one million tonnes of sugar in hand at the start of
2008-09 season, sugar availability in aggregate at 4.450 million tonnes
shall not complicate situation to a serious shortfall. However to keep sugar
prices fair in a reasonable range, import of raw sugar is a desirable option.
PSMA has presented a proposal in this regard for consideration of the authorities.
The provincial governments have increased minimum sugarcane price for
2008-09 season. In view of this increase and short crop size, economies
of scale will operate but unfavorably. This odd situation added by inflationary
tendencies in the national economy will have a significant impact on cost
of sugar production, bound to increase.
International sugar market, inherent part of the wider commodity markets,
during the year 2007-08 witnessed volatile price trend. It was in backdrop
of financial ‘tsunami’ gripping the United States of America
and its spillover the global circuit. Currency values fluctuation carried
a direct impact on commodity markets. Fear of recession rocked the boats
of once considered durable strong economies, dictating terms on global
business spectrum. The last quarter of October–December 2008 is
likely to give some insight to the future trend in sugar prices.
End stock estimate despite lower production and higher consumption during
the last quarter of 2007-08 is indicated to be larger than the corresponding
period of the preceding two years.
|Current price trend indicates sugar production to slip lower,
first time in the past four years of high tide in a row. Aggregate production
projection for October 2008-September 2009 is 161.248 million tonnes, to
be 6.602 million tonnes lower than at 167.850 million tonnes of 2007-08.
|European sugar production during 2008-09 season is 22.69
million tonnes from 26 million tonnes of 2007-08. Drop in Asia will be more
from 64.7 million tonnes to 60.5 million tonnes. Production is poised to
dip both in Pakistan and India. However, South America and Africa may go
up in sugar output.
|* Excluding unrecorded disappearance
in Pakistan is likely to go up slightly in 2008-09 to 4.7 (4.6) million
tonnes, due to population growth of 2%, against GDP growth lower to 4.2(6.08)%.
Rising prices by falling output is the reason for it. Sugar consumption
in Asia may rise by 3.2% in 2008-09 to 74.200 million tonnes. Off take
by the largest sugar consumer India may go up by 4.4 (7.1)% at lower pace,
to 25.5 (24.5) million tonnes.
Two preceding sugar years were of record breaking in crop size creating
sugar surplus. It will be on back foot in 2008-09. However, it can not
create supply slide and rise in prices as stocks hang higher by bumper
crops of 2006-07-08 years. However, hedge fund operations may create artificial
instability. Fundamentals of supply-demand-stock seem to keep cool.
At the conclusion of this report, I would like to register my appreciation
for the co-operations extended by the Central Executive Committee, Zonal
Chairmen and Secretariat staff, with my good wishes to the new elected
management of PSMA.
|18TH Nov’ 2008