- Colombian sugar imports could double this year, to 200k tonnes.
- This follows drought in Q1’19, which damaged cane growth, followed by flooding in Q2’19, which has slowed the cane harvest.
- We forecast 2019 sugar production at 2.1m tonnes – the lowest in at least 6 seasons.
Colombian Cane Harvest Progress is Poor
- Low rainfall in early 2019 led to cane development problems in the Cauca valley, the main sugar producing area of Colombia.
- As a result of low ag yields, the cane crush up to April was 1m tonnes behind the previous season’s.
Colombian Cane Crush
- The situation has since been worsened by heavy rains in May and June.
- 90% of the crop area has been affected and the harvest has been interrupted.
- And to make matters worse, we are seeing early signs of a potential spittlebug pest outbreak.
- The spittlebug injects toxins into the cane, reducing its capacity to photosynthesize, reducing sugar content.
- The impact of the outbreak is not yet known, and early crop protection could minimize yield loses.
Colombian Annual Sugar Production
- The extent of the damage over the whole season is not yet clear. Yields may still be affected later in the harvest.
- We will continue to monitor the situation; further crop downside is possible.
Domestic Price Fluctuation
- The domestic sugar price started to strengthen in H2’18, and this strength has since been sustained.
- Production in Colombia is year-round, so spot domestic flows are particularly vulnerable to harvest disruptions.
Domestic Reference Price for Sugar
- The higher domestic prices have opened the door to duty paid imports on a spot basis.
- The monthly calculated duty (Arancel) offers some arbitrage opportunity for opportunistic importers.
- So far imports have nearly reached 100k tonnes, and we believe another 100k tonnes will enter in 2019.
Colombian Sugar Imports
- Neighbouring Peru will most likely fill the majority of this demand due to proximity and shipment speed.
