Distinguished Members,

I feel pleasure to welcome you here on the boat club Karachi at the 49th Annual General Meeting of Pakistan Sugar Mills Association and present the annual review for the year 2013-14. The Annual General Meeting is being held at the end of September that correlates with the end of sugar year as well as the time to move to the next elected management of the Association. The Association holds election regularly for the centre and zonal management recently completed for the term 2014-15. As a result of election Chairman and the management committee for the centre and zones will be announced at the end of the meeting for the term 2014-15. Further to that the position of senior Vice Chairman as per DGTO rules shall also be announced. It is also added that DGTO has notified new rules called Trade organization rules 2013 along with Trade organization Act 2013 on 26th March 2013 copies of which already supplied to zonal offices for their record and action.

Sugar year 2013-14 was again a significant year in the sense that after two connective rich harvest the sugar industry faced with another surplus sugar year in the wake of higher global supply and lower sugar prices. The sugar industry was faced with problems of disposal of surplus sugar stock, lower ex mill price coupled with higher indicative price of sugarcane fixed by the Provincial Governments. However, with the consistent efforts of the PSMA we were able to overcome most of these issues.

PRODUCTION 2014-14

The Year under Review

 In 2013-14 record production of sugarcane crop was reported by the crop reporting departments of the Provinces has indeed been a gratifying feature for the season placing the crop area of sugarcane at 1.172 mln hectares with cane production of 67.428 mln tonnes. The higher production was due to favorable climatic conditions and timely prices received by the growers in the previous year. The sugar production from above crop by the close of the crushing season was reported to be 5.588 mln tonnes above the estimates of five mln tonnes plus in our previous annual report and above the domestic needs of 4.512 mln tonnes for a population of 188.02 mln at per capita of 24 /kg.

Sugar position for the year 2013-14 is as follows:

The higher production of sugar reported in 2013-14 and carryover stock of the last year created a glut-like situation, which kept the ex-mill sugar prices at very depressed levels and could not move out of its lowest ebb during the year of review. The prime and foremost responsibility, which PSMA carried out, was to make arrangements for disposal of surplus sugar. The only way out was to reduce the domestic stock through export in order to be able to improve financial position of mills and to create a space for the next crushing season.

Sugar Export

PSMA has been regularly in touch with the Government of Pakistan and held several meetings with the concerned ministries and pleading their case of actual on ground position of sugar production and surplus sugar stocks and its timely disposal in order to improve the liquidity of the mills to pay the growers dues of more than Rs, 200 bln.  As an outcome of our consistent efforts to arrest the lower trend in the ex-mill price and to enable the sugar mills to disburse the grower’s dues, the Government of Pakistan has allowed exports of 0.750 mln tonnes in 2013-2014 in addition to 1.2 mln tonnes allowed from 31-1-2012 to 11-12-2012.

The export was allowed on first come first serve basis with shipment period of 45 days through registration of contract with SBP with 25% non refundable advance payment for a quantity of 500,000 tonnes. To encourage the mills for export inland subsidy @ Rs. 1/- kg on the entire quantity of 500,000 MT of sugar was also agreed. In addition Oct 31, 2013 was permitted as cut off period for shipment of 250,000 tonnes and the rest 250,000 tonnes from November 2013 onward. This was done to facilitate speedy export to off load the excess quantity of sugar. Further to that the 2nd trench of 250,000 tonnes was approved in March 2014 by the ECC of the Cabinet in light of recommendation of Sugar advisory Board (SAB) meeting held on March 13, 2014. The dead line for this (250,000 tonnes) approved in March 2014 was kept at June 15, 2014. The Government has been encouraging the mills for export in order disposed off the surplus before deadline, however, the major impediment in the export of sugar was the very tough global environment with depressed international sugar prices for the past few years as well as the higher cost of production of the Pakistan Sugar due to high cost of raw material. A part from this some of the mills could not utilized their allocated quota in the given time and usually renewed their quota by the close of cut off period which created further hindrance in smooth flow of export.

To provide a congenial environment for export and to maintain a smooth flow of sugar export the issue of cut off period was taken up with the Federal Government of Pakistan and extended the deadline from 31 Oct 2013 to December 31, 2013 and further February 28, 2014 of the allowed quantity of 500,000 tonnes and similarly of the allowed quantity of 250,000 tonnes the cut off period was extended from June 15 ,2014 to Oct 31, 2014 with shipment period for export of sugar from 45 to 90 day with retrospective affect from March 27, 2014 and reduction in advance from 25% to 15%.

With these permissions in hand the sugar mills were able to export 0.637 mln tonnes of sugar out of the total permitted quantity of 0.750 mln tonnes. I appreciate the efforts of the mills that in spite of tough global milieu were able to export sugar and helped in reduction of the leftover stock.

On country basis the estimated area of sugarcane during the crop cycle 2014-15 is reported to be around 1.13 mln hectares down by 9.6% in Punjab and up by 1% in Sindh compared to 1.172 mln hectares during preceding crop year, 2013-14. It is estimated that sugar production from an area of 1.13 mln hectares would be around 64 mln tonnes of sugarcane based on 57 tonnes per hectare yield. The flood 2014 may have some downbeat affect on area in south Punjab and upper Sindh but this could not be anticipated at this time as sugarcane is a high delta crop and may survive such effect unless the soil is washed away.

Sugar production forecast by utilizing 80-85% of sugarcane production with a projected recovery of 9.9% is likely to be five mln tonnes plus. ISO forecast Pakistan sugar production for 2014-15 at 5.075 mln tonnes down from 2013-14 crops. The consumption for 2014-15 for a population of 191.79 mln at 24.6 kg per capita (world average) is likely to be 4.718 mln tonnes.

The first assessment of the world sugar balance sheet for the upcoming year 2014/15 crop cycle indicates a four years of statistical surplus, estimated at 1.633, 6.0,9.7, 3.99 mln tonnes from 2010-11 to 2013-14. The first forecast of world sugar for 2014-15 placed the world sugar production at 183.5 mln tonnes versus consumption of 182.44 mln tonnes thus leaving a surplus of 1.306 mln tonnes (Table 1). These phenomena not only added to the domestic stock but also put a downward pressure on the international and home prices. In India the ex-mill price touched a five years low in August 2014 (US $ 335/tonne.). Similarly in Brazil the continued downward trend in price reached a five years low in January 2014 at US $ 336/tonne. In Russia the domestic price reached three years high in June but sharply fell on arrival of 2014-15 beet slicing season. Since February the domestic sugar price fell by 25% in India with fall also recorded in Brazil and China.

Summary of the first assessment of the world sugar balance in 2014/15 is provided in the table below.

To conclude I would like to express my gratitude to the zonal Chairmen, Central and Zonal executive committees, all members of PSMA, and the Secretaries PSMA for their continued assistance and in time support during my tenure. I shall always be available to the new management for guidance and support if need be so that the industry moves forward together to meet the future challenges.