Strong carryover-stocks plus estimates of surplus production this year have led the government to allow limited export of sugar.

But sugar millers want still more: subsidy on exports or lowering of cane support price, or enhancement of export limits.

Government officials say the demand for subsidy cannot be met because of fiscal constraints. Lowering support price for cane cannot merit a serious consideration. But they say the Economic Coordination Committee can decide on more exports once the 0.5m tonnes limit is exhausted by March 2015.

Officials in provincial agriculture departments say that cane crushing got delayed because the ECC took time to allow sugar exports.

However, a few mills in Sindh and Punjab have already begun cane crushing after amicably settling disputes with growers over stuck-up payments. A senior official of Sindh agriculture department confirmed that at least three mills, one each in Sakrand, Mitiari and Sanghar, have started operation.

He said that in addition to resolution of payment disputes, overlapping commercial interests of big growers and millers had also prompted timely cane crushing in these districts.

But a majority of sugarcane growers fear that most millers might continue delaying cane crushing till the time sugar prices rise further, inflicting farmers financial losses. Sugar prices have already started inching up in the wholesale markets on reports of exports.

Sugar prices have started inching up in the wholesale markets on reports of exports

Officials, however, see no justification for sugar price hike because millers have enough surplus stocks, cane crushing is about to go full scale, projected output is higher than consumption and there is no immediate local demand pressures.

Sugar production this year is expected to range between 5.0-5.4m tonnes, against 5.7m tonnes last year, and 0.5-0.9m tonnes in excess of the estimated local consumption of 4.5m tonnes.

Agriculture Policy Institute (API) estimates total sugarcane output at 63m tonnes, enough to produce 5m tonnes of sugar. But if the Suparco’s production estimate of 68m tonnes is given more weight, then sugar output should touch 5.4m tonnes.

Casting doubts about API estimates, sugar millers allege that at the beginning of cane crushing season every year, policymakers routinely offer low output projections to keep sugarcane prices from falling. For most of them Suparco’s estimate, based on post-flood satellite survey of cane fields is more accurate.

In its October 2014 crop report, Suparco projected 75m tonnes of cane output but made it clear that 725,000 tonnes would not be available due to the flood-related damages, which reduces this estimate effectively to around 68m tonnes.

One thing that mars sugar economics is the timing of export. Millers say that every year the government finally permits exports of almost the same quantity of sugar that they originally demand. But since the government allows exports in installments — with intervals often stretching more than three months — not only exporters lose competitiveness, the entire sugar market remains in the grip of uncertainty.

Senior officials of Pakistan Sugar Mills Association (PSMA) say their demand for sugar exports of up to 1.5m tonnes this year takes into account prospects of adequate output and carry-forward stocks of no less than 1.5m tonnes. “But the government insistence that we should first export 0.5m tonnes by next March would not only keep the marketing uncertain about the extent of surplus, impacting on prices; it’d also be difficult for exporters to make supply commitments to foreign buyers which, can result in loss of some export orders,” explains a former PSMA head.

Government officials say the timing of sugar exports is set keeping in view its possible implications for cane growers, millers and consumers. Officials of the Ministry of National Food Security and Research say that during the last marketing year (October 2013-September 2014) sugar millers exported slightly less than 725,000 tonnes of sugar when production totaled 5.7m tonnes against 5m tonnes a year ago.

“This year, after meeting local demand and keeping strategic reserves, the industry can export half a million tonnes,” says a senior official, explaining why the current export limit was set at this level. He and other officials also dispute the millers’ calculations about carry-forward stocks. According to their own estimates, the stocks are slightly over 1m tonnes.

Officials say the government decision to impose 20pc regulatory duty on sugar imports is aimed at saving exporters from unnecessary competition. Instead of piling up demands on the government, the sugar millers must appreciate such measures, they insist.

Meanwhile, Kissan Board Pakistan Sardar Zafar Hussain has demanded setting up of a regulatory authority to ensure implementation of support prices of key crops including cane. This merits consideration at policymaking level because every year, small farmers, in particular, don’t get right prices for their produce—and are often seen selling them below support prices—thanks to delaying tactics employed by millers and delayed intervention of such state agencies like Trading Corporation of Pakistan or Pakistan Agricultural Supplies and Storage Corporation.

Published in Dawn, Economic & Business, November 24th, 2014