27 April 2012
Sugar Cane for Centrifugal
Recent production numbers compiled by FAS office in San Salvador show that the 2011/12 sugarcane harvest is expected to reach 5.35 MMT. Sugar production is estimated to be 640,000 MT in 2011/12. These positive production numbers are a direct result of the local sugar industry working to control sugarcane burning during harvest, to create new sugarcane varieties that are more resistant to pests and diseases, and to increase investment in the sugar milling process. Thus, sugar recovery yields which are estimated at 119 kilograms per MT for the 2011/12 season are expected to continue a positive trend for the 2012/13 harvest. Sugar production is expected to decrease slightly in 2012/13 reaching approximately 620,000 MT. This 20,000 MT reduction is mainly due to possible unfavorable weather patterns in the coming season.
Area planted grew to 64,000 hectares (ha) during 2011/12 mainly due to positive international sugar cane prices. Planted area could increase in the near future if the Ethanol Production Law is implemented since there is ample idle land in the country that can be devoted to increased sugarcane production.
Grower prices continue to be set according to the sugar content of the cane. According to the Sugar Law, producers receive 54.5 percent of total sugar sales, with the rest going to the sugar mills. The mills distribute this sales income (the 54.5 percent share) among sugar producers based on the amount of sugarcane they provided. Continued investment on part of all sugar mills has helped reduce downtime during the milling process, as well as increase sugar recovery rates to a more competitive position within the region.
Continued increased consumption by the candy and juice industry continues to provide stability to internal consumption numbers with domestic consumption reaching 242,000 MT in 2011/12. Higher exports of these products due to opportunities provided by the CAFTA-DR Free Trade Agreement could contribute to increased consumption in the medium term. Post estimates 2012/13 consumption at 243,000 MT; however consumption numbers will ultimately depend on the recovery of the Salvadoran economy.
Exports for 2011/12 are expected to reach 409,000 MT. The export forecast for 2012/13 is 378,000 MT.
The GOES continues to impose a 40 percent ad-valorem import tariff on all sugar; the bound rate is 70 percent as the GOES considers sugar politically sensitive because it is an important driver of rural income and employment. Even though CAFTA-DR has spurred regional tariff harmonization to avoid triangulations and market disruptions, the Central American region still has not agreed on a harmonized import tariff for sugar.
Canada and the U.S. re-export markets are major destinations for Salvadoran sugar exports. In MY2011, 67,390 MT were exported to Canada. Other important destinations include Taiwan, South Korea, Spain and Chile. Export destinations for 2012 are expected to be similar to 2011. [For table on Export Trade Matrix, please download the document]
Ending stocks in 2011/12 are estimated at 20,000 MT. Contraband sugar from neighboring countries is under control and does no longer causes a disruption to the local market. The National Sugar Law states that all sugar sold locally must carry a safety seal provided by CONSAA. Stock levels are expected to decrease by approximately 1,000 MT in 2012/13.
The GOES continues to require that all sugar sold in the local market be fortified with vitamin A to reduce blindness in the local population. Both producers and millers share this cost. The GOES has not designed a specific production support or assistance program for the sugar sector; instead, limiting market access through tariff protection continues to be the leading support mechanism.
Under the National Sugar Law, CONSAA is in charge of regulating the sector. CONSAA has a board of directors which includes members from the government, sugar producers, and sugar mills.
A law for the production of alternative fuels, including ethanol, is still under review by the Government of El Salvador (GOES). Under the previous GOES administration there was agreement with the sugar industry on a 10 percent mix for ethanol and with gasoline. But thus far the current government administration has not decided on enactment of this law arguing that they need to make sure that it is beneficial and has no negative impact on the environment and on consumers.
The following are some of the areas where the sugar industry continues working to improve sugar profitability:
- Production of only the amount of sugar that can be sold at profitable prices;
- Improvement of milling yields;
- Diversification of mill income by focusing on energy generation;
- Improvement of sugar cane varieties to have better sugar recovery yields and higher quality sugar;
- Exchange of research and technology with other sugar producing countries; and
- Introduction of new sugarcane varieties that are pest and disease resistant.
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