• Pakistan is unlikely to export sugar in 2020; dry weather has hit cane availability.
  • Given the low production outlook, domestic prices have risen to $440/mt, a premium to the world market.
  • Regional buyers like Afghanistan may have to turn to origins such as India for supply. 

Exports Trickle As Stocks Tighten  

  • Pakistan exported 739k tonnes of sugar in 2019, but is unlikely to be able to keep this pace up in 2020.
  • 418k tonnes wereexported to neighbouring Afghanistan, and 300k tonnes went to China in two tranches under a Government to Government (G2G) deal.
  • However, world market exports (aside from Afghanistan and China) have dropped drastically from 947k tonnes in 2018 to 22k tonnes in 2019.
  • This is because the Pakistani government reduced the level of subsidy available to sugar exporters in 2019.
  • Strong domestic prices mean that Pakistani exports are now only viable at $440/mt, making Indian whites comparatively more attractive.
  • Key destinations for Pakistani whites, such as Afghanistan, are likely to turn to price-competitive Indian whites.
  • The Pakistan-China bilateral deal, which accounted for 300k tonnes in 2019, could continue if China continues to pay above market levels to ensure exports.
  • However, given the low stock levels, Pakistan might need imports for its own domestic needs in order to fulfil G2G exports to China.

Pakistani Production Reducing  

  • Pakistan’s poor production observed in the 2018/19 season has resulted in tight availability as production falls below consumption.
  • Pakistan might not export to the world market this season.
  • Production is expected to reach 5.3m tonnes this season, similar to the 18/19 season.
  • Punjab, one of the main production regions, had slightly below average rainfall this monsoon.
  • This is Punjab’s third consecutive year of below average monsoon rainfall and it could impact cane yields.
  • Sindh, on the other hand, had excess monsoon rainfall last year. Agricultural and sucrose yields could therefore be supportive for sugar production in Sindh.
  • Punjab must have a successful season if the estimated 5.3m tonnes of sugar production is going to turn into reality, as it accounts for 70% of sugar production.