INDUSTRY ANALYSIS –

SUGAR IN PAKISTAN

APRIL 2019
 Sugarcane – Sugar & By Products

Sugarcane

Sugar Molasses Bagasse Bagasse

Power
Ethanol
Paper/Chipboard
 Value Chain – Where do they fall?
SUPPLY CHAIN

Distributor/Industrial
Farmer Sugar Mill Retail Stores End Customer
Consumers
 Key Attributes
DYNAMICS OF SUGAR INDUSTRY

Contribution to No. of Players: 75

GDP (Sugarcane): Total Number of
.7% of GDP Mills: 89

30 Sugar
Companies Listed Sugar Production:
on Stock 6.5 mln tonnes
Exchanges

Sugar
Consumption: 5.4
mln tonnes
 Raw Material | Sugarcane – Statistics
 Government
support to
sugarcane prices
guarantees a
better return to
farmers, leading
to increase in area
under cultivation.
 However,
consistent delay
in payments to
farmers and
anticipated water
shortage has
resulted in lower
area under
cultivation and
yields.
 Punjab accounts
for ~65% of
sugarcane area,
Sindh ~25%, and
Khyber
Pakhtunkhwa
~10%
Source: USDA Foreign Agricultural Services GAIN Report, Pakistan Sugar Mills Association Annual Report 
 Sugar Production vs. Consumption
Sugar Production vs. Consumption
7.5
7.0 7.05

6.5 6.576

6.0
5.6
mln tonnes

5.5 5.2
5.5
5.1
5.0 5.1 5.4
5.1 5.2
4.5 4.9
4.5 4.6
4.0 4.4

3.5
3.0
2.5
MY12 MY13 MY14 MY15 MY16 MY17 MY18 MY19

Sugar Consumption Sugar Production

 Pakistan has experienced surplus production in the past years in comparison to it’s domestics consumption
 Domestic consumption has been on steady increase in line with population growth
 Soft Drink, Snacks and Confectionary Industry constitute a significant portion of in Sugar consumption

Source: USDA Foreign Agricultural Services GAIN Report, Pakistan Sugar Mills Association Annual Report 
 Sugarcane – Processing
Sugarcane crushing, Production & Recovery
80 11.0%
71.0
70 65.6

60 56.5 55.9
50.1 50.8 50
48.2
50
Mln Tons

10.2%
40 10.0% 10.0% 10.0%
10.0% 9.9% 9.9%
9.9%
30 9.8%
20
10 5 5.6 5.1 5.1 7.0 6.6 5.5
4.7

0 9.0%
MY12 MY13 MY14 MY15 MY16 MY17 MY18 MY19 (P)

Cane Crushed Sugar Made Recovery

Cane Crushed Sugar Made Recovery

 Pakistan achieves a lower than global average recovery rate owing to lower quality cane varieties
 Higher recovery rates are achieved in the province of Sindh owing to suitable weather conditions
 Other factors impacting recovery rates include days between cane harvesting and crushing
 Significant research and development initiatives to improve sugar processing rates need to be taken

Source: USDA Foreign Agricultural Services GAIN Report, Pakistan Sugar Mills Association Annual Report  
(P) Based on Average utilization by mills and provisional Sugar production data 
 Sugarcane Price | Controlled by Government

Mill Gate Delivery Prices  In 2016 Cane Commissioner

PKR/tonn
Sindh had fixed the price at
190
182 182
PKR 172 – lower than
180 182 182 Punjab and Sindh –which
180 180 180
172 172 180 180 was challenged by growers in
170 172
High Court Sindh,
170 170 Hyderabad.
 During 2017, as per norm the
RS / 40 Kg

160
154
Prices fixed by Sindh
150
150
Government are 1% higher
140
than those fixed by Punjab &
KPK.
130  However, a stay was
obtained by Millers in Sindh
120 to procure cane at PKR
MY12 MY13 MY14 MY15 MY16 MY17 MY18 MY19
162/MT in FY18.
Punjab Sindh KPK  Announced cane prices were
maintained in MY19

Source:Pakistan Sugar Mills Association Annual Report 
 Sugar Cost-Price Comparison
 Cost of sugarcane – essential raw material – has increased in recent years. The decrease in Sugarcane
indicative in MY16 is due to Sugarcane support price in Sindh was fixed 4% lower than that of
Punjab and KPK. MY17 the Sindh sugarcane support price was increased to PKR 182 per 40Kgs,
which was maintained in MY18.
 Selling Price of sugar determined by market dynamics stood at an average of PKR 54/Kg during
MY18. The prices have rallied up to PKR 57/Kg from MY19 (Mar) as sugar production decreased
during the in MY19.

Sugarcane Indicative Price vs. Season Avg Retail Price

70 185
181 181 181 181
177 180
65 65 175
64

PKR/40 kg
PKR/kg

171 171 170

61
60
165
57
55 55 160
54
53 54 155
151
50 150
MY12 MY13 MY14 MY15 MY16 MY17 MY18 MY19
Average Retail Price Sugarcane Indicative Price (RHS)

Source: Pakistan Sugar Mills Association Annual Report  
 Sugar Industry – Exports

 Exports of sugar more than tripled in MY18 due to an increased export quota of 2mln MT coupled
with an export subsidy of Rs 10.7/kg from the federal government and an additional subsidy of
Rs9.3/kg from the Sindh government.
 In MY19, the export quota has been revised to 1mln MT, however no subsidy was announced at
federal level. At provincial level, Punjab announced a subsidy of Rs5.3/kg but sugar exports still
remain low due to pressure from international sugar prices.
Source: Pakistan Bureau of Statistics
 Sugar Prices| Domestic & International
70  0.65
0.61  65
65 63  0.60
61
60 57  0.55
56
0.50 
53 54 54
55 0.48   0.50

USD/Kg
PKR/kg

0.46  0.46 
54
50 53  0.45
49 48 48
45 0.38   0.40
46
0.36 
43 0.35 
40  0.35
38
35  0.30
MY12 MY13 MY14 MY15 MY16 MY17 MY18 MY19

Average Retail Price (Domestic) Average Futures Prices (International) PKR Per kg

 Depressed international sugar prices are on account of excess sugar supply mainly emanating from
India and Thailand
 Domestic Sugar prices are higher than sugar production owing to lower yields, recovery rates and
higher cost of production
 Increase in Domestic prices emanate from lower sugar production during MY19.
Source: Pakistan Sugar Mills Association Annual Report, Pakistan Bureau of Statistics, International Sugar Organization 
 Sugar Industry – Dynamics
FY19:
 Cultivated land declined for
Sugar Dynamics
MY 19 by ~12%. 10.0

 Sugar production declined by 8.0

~16% -
6.0 - - -
 Export Quota has been allowed 4.0
for upto 1 mln tons to date 7.1 6.6
mln tonnes
5.1 5.6 5.2 5.1 5.5
without freight subsidy except 2.0 4.7
in Punjab @ Rs 5.3/Kg
- (0.8) (0.4) (0.3) (0.2)
(1.2) (0.9) (1.48)
 Low prices in the international
(2.0)
market has not encouraged
exports meagre of .2mln MT (4.0)
till Oct-Mar 19 compared to
(6.0)
.8mln MT in SMPLY.
(8.0)
MY12 MY13 MY14 MY15 MY16 MY17 MY18 MY19

Production Imports Exports Available Cons Cl st

Source: USDA Foreign Agricultural Services GAIN Report, Pakistan Sugar Mills Association Annual Report  
 Sugar Industry – Operational Capacity
Production Share Of Top Player
Production Share of Top Play ers - M Y18
Sr. # Sugar M ill Region Production (M T Recovery Rate M arket Share
1 J.D.W (Combined) Punjab & Sin 888,711 10.5% 14%
2 HAM ZA Punjab 382,495 10.4% 6%
3 TANDLIANWALA (Comb Punjab 220,698 8.9% 3%
4 DEHARKI Sindh 205,788 10.9% 3%
5 SHEIKHOO KPK 195,006 9.8% 3%
6 CHASM A (Combined) KPK 193,323 9.4% 3%
7 ETIHAD Punjab 170,855 10.7% 3%
8 LAYYAH Punjab 168,596 9.8% 3%
9 TWO STAR Punjab 162,514 9.6% 2%
10 R.Y.K Punjab 162,398 10.7% 2%
11 INDUS Punjab 148,530 10.9% 2%
12 FATIM A Punjab 146,355 10.0% 2%
13 HUNZA (Combined) Punjab 144,739 8.7% 2%
14 M EHRAN Sindh 120,200 11.5% 2%
15 ALLIANCE Sindh 115,930 9.8% 2%
16 AL-NOOR Sindh 110,810 10.0% 2%
17 AL-M OIZ Punjab 107,106 10.1% 2%
18 HABIB Sindh 106,005 10.3% 2%
19 FARAN Sindh 105,633 10.7% 2%
20 AI-M OIZ KPK 103,801 9.9% 2%
21 Others 2,620,620 40%
Total 6,580,113
 Risk Analysis | Sugar Industry

─ Fluctuating gross margins due to cost-price disparity: Higher price of

sugarcane (controlled by Government) with no mechanism for corresponding fluctuation
in the prices of sugar
─ Unfeasible export avenues: Difficulty in selling sugar abroad at better prices despite
devaluation of PKR in years of excess production
┼ On import of sugar; Imposing 40 % regulatory duty Ad Volarem in Jun-15
(previously: 20%)
┼ Diversification through revenues from co-generation projects: (i) molasses is
also used in the production of pharmaceutical and fuel grade ethanol while (ii) bagasse is
used in electricity generation and paper/chip board