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USDA GAIN: Oilseeds, Cotton, Sugar, Grain and Feed


24 April 2012

USDA GAIN: Turkey Sugar Annual 2012USDA GAIN: Turkey Sugar Annual 2012

Production quotas for both beet sugar and starch based sugar remained unchanged at 2,288,000 MT and 244,000 MT respectively in marketing year 2011/2012 and will also be the same for marketing year 2012/2013. In response to lower quotas, the plantation area decreased to 2.9 million decars and sugar beet production decreased to 16 million MT in MY 2011/12. Total centrifugal sugar production remained at 2,262,000 MT as expected. Similar figures are expected for the next marketing year due to unchanged quotas.
USDA GAIN Report - Oilseeds, Cotton, Sugar, Grain and Feed

Commodities:

Sugar Cane for Centrifugal
Sugar Beets
Sugar, Centrifugal

Production:

Sugar is primarily produced from sugar beets in Turkey instead of sugar cane due to climatic conditions, like most of Europe. Sugar beets are grown mostly in the Central Anatolia Region, namely in Ankara, Konya, Eskisehir, Afyon, Tokat and Yozgat cities and are planted in rotation with cereals, pulses, fodder crops and sunflowers. Sugar beets are planted in the spring, around April, and are harvested around October, with the time varying according to climate conditions of the plantation region.

The production of sugar beets and consequently sugar is limited by quotas specified by the Sugar Board as per the Sugar Law (Nr.4634) which has been in effect since 2001. The major changes brought forth by this law are:

  • the application of quotas for the production and supply of sugar,
  • the lifting of government intervention on prices of beets and sugar, and
  • the appointment of a Sugar Board to regulate and control the sector in respect to the provisions of the law.

The Sugar Board announces the annual production quotas for the whole sugar sector, including starch based sugar. Quotas are divided into three groups. The 'A' quota specifies how much sugar (from both corn and sugar beets) companies can sell in Turkey within a marketing year. The 'B' quota is an extra amount that is produced and kept as spare or as a buffer, and its volume is calculated as a certain percentage (generally 4%) of the A quota. The 'C' sugar is allocated for export sugar and is sold at world prices. There is no C quota announced, since excess A-quota is purchased by factories as C sugar which cannot be marketed domestically and is only for utilization in products that will be exported.

In the Turkish sugar sector there are 7 beet sugar producers and 5 starch based sugar (SBS) producers, and the total sugar production quota is allocated to these 12 companies. The 7 beet sugar producers have 33 factories which have a total production capacity of 3.1 million MT per year. All the SBS producers are private and they have a total capacity of processing 888 thousand metric tons of corn. The total sugar production capacity of Turkey is 4,137,000 tons; 3,147 thousand of this is beet sugar, and 900 thousand tons is starch based sugar.

From the above list, Turkiye Seker Fabrikalari A.S., otherwise known as TURKSEKER is a public entity, Konya, Kayseri and Amasya Sugar Factories are grouped under the beet producer cooperative called PANKOBIRLIK, and Keskinkilic is private. Formerly owned by the state, Kutahya Sugar Factory was sold to a private firm (Torunlar Gida San. Ve Tic. A.S.) and Adapazari Sugar Factory was sold to the Adapazari Sugar Beet Planters Cooperative in 2004.

The map below shows the locations of all production facilities throughout Turkey. There are 33 sugar plants and 6 SBS plants in total. The plants marked with gray color (25) are the public beet sugar production factories that belong to Turkiye Seker Fabrikalari A.S. The green ones (8) are private beet sugar production factories and the yellow ones (6) are starch based sugar production plants that are all private.

Sugar Beet Production and Prices

In MY 2011/2012, the planted area contracted down to 293,168 hectares due to the decreased production quotas and since the quotas remain unchanged for MY 2012/2013, the plantation area is not expected to exceed 3 million square meters next year. Sugar beet production costs approximately USD 70 per ton. The average price for 2011 harvest “A” quota beets with a sugar polarity of 16% was 0.126 TL/kg, and the price for C quota beets was specified at 0.075 TL/kg.

The production system works like this:

  1. Sugar Board announces the quotas for the Market Year and allocates it to the existing factories.
  2. Factories make contracts with the farmers in their vicinity as per their allocated production quota at a set procurement volume and price.
  3. Farmers plant their beets around April and harvest them around September,
  4. The predefined amount of beets agreed upon by the farmer and the factory is purchased by the factory at the A-quota price and any excess amount is purchased at the C-quota price.

Sugar production has also a social aspect in Turkey. Being a labor-intensive commodity, sugar beets act as a means of reducing the farmers? immigration to big cities. Many of the state-owned factories in this respect were opened in areas with high unemployment rates, and these plants are still supported even though they do not have economically feasible operating conditions. For instance, in comparison to the country average of a 100 day processing period, also called the “campaign period”, this period ranges from 23 to 40 days in these factories.

Even though the number of farmers planting sugar beets has decreased more than 60% in the last decade (came down to 196,904 farmers in 2010), this has been a result of not only the application of quotas, but also largely due to the commencement of a farmer registration system. With this new system, only one person from a family is recorded as the farmer in the online registry system instead of several members from the same family.

Meanwhile, as it can be observed from the above table, yields are increasing each year due to the use of modern agricultural techniques, especially in irrigation. The use of modern seeds also plays an important role in this increase. The average yield per 1000 sqm increased from over 3 thousand tons in the 90?s to around 4.5 thousand tons after 2000. In the last three years this figure has exceeded 5 thousand tons and reached nearly 5.5 thousand tons in 2011.

Centrifugal Sugar Production and Prices

The government had supported the sugar sector with high procurement prices in the past (before the enactment of the Sugar Law), whereas the price is now determined by the consensus of sugar factories and producers (or their representatives) before plantation. Consequently, sugar prices increased steadily from an average of 1.51 TL/kg in 2007 to 1.79 TL/kg in 2011. Beet sugar production and t he weighted average sales prices of crystal and cube sugar actualized by the companies in the past five market years are given in the following table.

Even though the announced official prices may be higher, (for instance 2.53 TL/kg is published until June 2011, then 2.71 TL/kg until January 2012, and 2.73 TL/kg since then) companies carry out credit sales and discounts throughout the market year to eliminate their stocks. Therefore, the prices above are actual sales figures (excluding Value Added Tax-VAT) obtained from all the sugar factories and calculated on a weighted average basis.

In 2012, granulated sugar in 50 kg bags is sold for 106.38 TL and 50kg bags of cubed sugar is sold for 131.76 TL.

Prices applied for C sugar sales have been 688 $/MT on average in January 2012 and 705 $/MT in February 2012 (monthly averages are calculated based on the prices on each day of the relevant month).

Starch Based Sugar (SBS)

The 'Raw Material and Sugar Prices Decree' requires the use of domestically grown corn for the production of SBS that will be marketed domestically (since 2009). There are currently 5 SBS companies that are allocated a quota and their total production capacity is approximately 1 MMT/year. These companies are all private and have 6 plants. Apart from these, there are 3 other SBS companies that are not allocated quotas and produce sugar based starch for export purposes only. These have a total SBS production capacity of 146,000 MT/year.

B quota is not allocated for Starch Based sugar as per the Sugar Law, yet the initial quotas specified for SBS were increased 50% in MY 2009/2010 and MY 2010/2011 by Cabinet decrees. The table below shows the distribution of the Starch Based Sugar Quota among the 5 SBS producer companies.

Prices

The Turkish Grain Board?s (TMO) corn purchasing price increased from 0.49 TL/kg in 2010 to 0.54 TL/kg in 2011. Since the amendment to the Raw Material and Sugar Prices decree in 2009, all the corn necessary for SBS production to be marketed domestically is supplied from local growers. In CY 2011, 939,000 MT of corn was used by SBS producers for starch production and export SBS volumes. These SBS producers also produce starch, and the amount of corn listed includes both export SBS and starch.

Molasses

Sugar beets are used not only as a raw material for the sugar industry but they are also a very important feed ingredient for the livestock industry. Sugar factories produce molasses and sugar beet pulp as a side product and this pulp is used either directly or as a mixture with molasses in the feed sector. Naturally, production of these side products are rising in parallel to the amount of beets produced in the factories. Improvements in sugar beet production consequently helps increase milk and meat production.

Other than feed, molasses is also used in a variety of sectors such as medicine, cosmetics, construction, alcoholic beverages and yeast. Annual molasses production does not vary vastly from year to year and is around 670 tons. The price of molasses varies according to its place of production and sales. For instance the price per metric ton of molasses from the 1st region (Afyon, Alpullu, Eskisehir, Susurluk and Usak factories) is 344 TL whereas it is 273 TL/MT for that from the 4th region (A?r?, Bor, Erci?, Ere?li, Kars, K?r?ehir, Mu?, Yozgat factories) in 2012.

Ethanol

Another side product obtained from the processing of sugar beets is ethanol. Ethanol is obtained from starch and glucose containing plants like corn, sugar beets, wheat, etc. Currently sugar beets are the main source of bio-ethanol production in Turkey, followed by corn and wheat.

The Energy Market Regulatory Authority (EPDK) published a draft communiqué in September 27, 2011 that obligates the mixture of 2% bio-ethanol into the oil sold in Turkey starting from January 1, 2013. Since 2006, distributors have had the option of mixing up to 2% bio-ethanol into oil, and those who use 2% bio-fuel have benefited from a 2% exemption from Special Consumption Tax, but this has been voluntary. The same law calls for a further increase in this figure to become 3% as of 2014. It is worthwhile to state here that the law enounces this bio-ethanol to be obtained from domestically grown agricultural products. The law also puts forth similar figures for biodiesel mixture into the diesel fuel starting from year 2014.

The EPDK data shows that current annual consumption of Turkey is 2.7 billion liters of gasoline and 16.3 billion liters of diesel fuel. Based on these figures, when 2% bio-ethanol starts to be mixed into all the marketed gas, 54 million liters of bio-ethanol will be used in 2013, and at a 1% mixture rate, 163 million liters of biodiesel will be used in 2014.

There are four bio-ethanol plants in Turkey.

In light of the established bio-ethanol production capacity of Turkey, it is foreseen that out of this 54 million liters of bioethanol; 34 million liters will be produced from sugar beets, 10 million liters will be produced from corn, and 10 million liters will be produced from wheat. This will call for an additional production of 540,000 tons of sugar beets. In order to accommodate this need, 13,355 hectares will be used for energy. Starting from 2014, when a 3% mixture rate will be applicable, 80 million liters of bioethanol will need to be produced and this will necessitate an additional production of 800 thousand tons of sugar beets. Even though the government has not yet made a nation-wide plan to address this need, individual producers are planning their plantations accordingly for MY 2012/2013.

Bioethanol Production in Turkey

54 million liters of bioethanol mixture will result in 330 thousand cubic meters of oil replacement and this will mean a US$ 203.4 million of reduction in oil imports. Extra production will mean employment for over 3000 people which will contribute another 387.4 million dollars to the economy. There will also be an increase of 106,800 tons of high-protein feed which will be worth over 30 million dollars.

Biodiesel on the other hand is obtained from oilseeds and Turkey is already a net importer of oil seeds. Therefore, at the absence of a national bio-fuel program or action plan, the sugar beet industry welcomes the mandatory mixture figures in bioethanol, but rejects those in biodiesel claiming that it would elevate imports drastically.

Consumption:

Turkey is the world?s fifth largest beet sugar producer, ranking behind France, Germany, the United States, and Russia. With a population approaching 75 million, Turkey is also a significant consumer. Annual consumption is around 2.3 million tons. Increasing urbanization rates and consequently changing lifestyles and eating habits play an important role in increasing sugar consumption. This is reflected in the increase of SBS imports.

Starch Based sugar that is derived from corn is not directly consumed but is rather used as an ingredient by the industry in the production of candies, baked products, traditional desserts, ice cream, halva, jams, and alcoholic and non-alcoholic beverages.

There are 17,300 food facilities in Turkey with a total food production capacity of 186 MMT. Of this total, 14 MMT or 7.5% belongs to the sugar products sector. 14% of all registered workers in the Turkish food production industry are employed in the sugar products sector. Turkey?s total food and beverage exports are US$ 5.9 billion, mainly to Africa, the Turkic Republics, and the EU. US$ 628 million or 10% of these exports are from the sugar products sector.

Trade:

A marketing year starts after the harvest and lasts until the next autumn (i.e. from September 1 to August 31 of the following year). Albeit its 4-5 month production period that starts generally around September and ends in January, sugar is marketed for 12 months. The state-owned Turkish Sugar Corporation and private producers, wholesalers and retailers handle the marketing of sugar.

The sweets and confectionary sectors in Turkey are undergoing changes. Production of chocolate and cacao products increased substantially compared to the traditional Turkish products such as Turkish delight and halva. The sector is also increasingly using SBS instead of beet-sugar. Exports of sugar and chocolate confectionary products increased from US$ 585 million in 2009 to US$ 643.5 in 2010. US$ 364.5 million of this was from chocolate and cacao products and US$ 96 million was from gummy and jelly sweets. Iraq is the leading importer of confectionary sweets followed by USA and UK. Algeria is also an important market for chocolate and cacao product exports. In 2011, a total of 104.3 thousand tons of starch based sugar was exported, compared to 74.1 of beet sugar.

Domestic beet sugar production is protected by a 135% import tax but there is no such limitation for the imports of non-sugar sweeteners. Despite the yearly fluctuations, registered sugar imports are negligible (less than 5 thousand metric tons) and are limited to specialty sugar that is not domestically produced (medical, laboratory use, etc.).

In recent years, smuggling was reduced due to the increased controls and preventive measures taken by the Sugar Board.

Stocks:

Companies operating in the sector market the amount of sugar specified by the A quota within the same marketing year in the domestic market. If a company cannot market its allocated amount of A quota sugar, the remaining amount is transferred to the A-quota of the following marketing year and hence the A quota for the following year is reduced in that transferred amount. If the company prefers this can be transferred to C sugar to be exported. In any case, the companies have to preserve their security reserves (B quota).

Any remaining stocks at the end of a marketing year mostly belong to Turkiye Seker Fabrikalari A.S and are kept at the factory silos, since the private companies have more flexible marketing policies (discounts and credit sales) and they usually try to sell everything they produce following the end of a production period.

Beginning stocks for MY 2011 were 462,000 MT and ending stocks were 379,000 MT. Due to unchanged production quotas and export figures, Post forecasts stocks to be around to be 334,000 MT for the end of MY 2012.

Starch Based sugar companies usually produce and sell their entire allocated quota and are left with no more than 10 or 15 thousand tons of stocks at the end of the marketing year.

April 2012

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