The Government of Pakistan has decided to import 100,000 tons of sugar from Brazil in September.
This development comes after continuous attempts to curb smuggling, which have yielded limited success. The court’s intervention, blocking government efforts to fix retail prices, has resulted in the ongoing continuation of smuggling.
The Trading Corporation of Pakistan (TCP) has engaged with the Pakistani Trade and Investment Counselor in Sao Paulo, Brazil to explore avenues for procuring white refined sugar.
Given Brazil’s stature as one of the world’s largest sugar producers and its history of supplying Pakistan with white refined sugar, the government is considering procurement from Brazil through either government-to-government (G2G) channels or involving private sector participation, reported a national daily.
The TCP has formally requested the trade counselor to establish contact with potential sugar suppliers in Brazil with the aim of securing a supply of 100,000 metric tonnes for delivery to Pakistan in September 2023.
TCP’s Executive Director, Riaz Ahmed Shaikh, communicated the request in a letter to the Trade and Investment Counsellor in Sao Paulo, Waqas Alam. In the letter, Shaikh also shared the details of potential companies for both G2G and private sector arrangements.
It’s interesting because the government first allowed to export of sugar through ECC in November 2022 for 100,000 tons and then expanded the limit to 250,000 tons in January. According to official data, nearly 215,000 tons of sugar had been exported by June 2023 while the trend continued in July as well before ECC finally decided to ban the export yesterday.
“A significant number of sugar mills have already oversold their stocks, promising delayed deliveries even before the crushing season’s commencement. With three months left to begin the season, the situation is anticipated to deteriorate further,” stated a market consultant in conversation with ProPakistani.
He added that the government’s decision to ban exports was too late. As long as international prices continue to rise, the government’s ability to stop smuggling remains limited. There’s also a high likelihood that the government might expend an amount nearly equivalent to its earnings from sugar exports on importing sugar eventually. In this entire situation, only the sugar sector stands to make a profit amidst the chaos.
Although the government had permitted the export of 250,000 tonnes, illicit traders managed to send out 600,000 tonnes to Afghanistan, capitalizing on the price disparity. Acquiring sugar at Rs. 80/kg, these smugglers sold it in Afghanistan for Rs. 160/kg.
The consultant also said that Ex-Mill Sugar prices have already surpassed Rs. 16,000 per 100 kg, marking a 25-30 percent increase in just a month and a half. These prices are anticipated to exceed Rs. 18,000 per 100 kg by September. Meanwhile, retail prices have surged above Rs. 180 per kg in certain regions. Wholesalers are also encountering challenges in sourcing sugar, even at elevated prices. This suggests that Sugar is poised to breach the Rs. 200 per kg mark in the near future.
On the other hand, international sugar prices have risen by almost 30 percent year over year, currently reaching their highest point in over a decade at $709 per ton. The International Sugar Organization has forecasted a decline in sugar production by 2.12 million tons, attributed to reduced output in countries such as Brazil, Thailand, India, and China.
The El Niño weather system has disrupted temperature and rainfall patterns, resulting in prolonged drought in certain regions, including Brazil, which has further contributed to the production decrease.
The rise in crude prices has also made some countries diver their sugar stocks into ethanol production and with India, the second biggest sugar exporter baning exports, the prices are projected to cross $900 per ton in the coming season so it is highly unlikely that Pakistanis can expect any relief whatsoever from these imports.
Responding to questions about the necessity of sugar imports, PSMA Chairman Zaka Ashraf highlighted the delayed authorization for sugar exports by the government. Ashraf asserted that the government’s withholding of 1 million tonnes of sugar exports deprived the country of potential foreign exchange earnings amounting to $1 billion.
Ashraf underscored the need for competitive domestic sugar rates vis-à-vis neighboring countries to stimulate increased sugarcane cultivation and domestic production. He contended that without this competitiveness, the potential for both local needs and exports would remain compromised.
Source: Pro Pakistani