Is it the international prices hike or local traders' misconduct that made sugar bitterly expensive, asks Sherine Abdel-Razek After tomatoes and meats, sugar became the talk of the town. Suddenly the sweet stuff became bitterly expensive jumping to LE6.5-7 per kilogramme in supermarkets compared to LE4-4.50 in late August. Even subsidised sugar offered in cooperatives increased to reach LE4 compared to LE3.5. "With Egypt importing 1.2 million tonnes of its overall annual consumption of 2.8 million tonnes per year, it is normal that any upward movement in international prices affect the prices here," said Amr Asfour, deputy of food products division in the Cairo Chamber of Commerce. Asfour points out that the price of a sugar tonne in international markets reached $715 compared to $630 two months ago. International sugar prices have been rising since June after three months of heading south from its February peak. The increase came on concerns that the sugar markets will not see the expected surplus for 2010 amid worries about the effect of weather on the crops of Brazil and India, the world's largest producers with stakes of 24 and 19 per cent, respectively, of world production. Importers' attempts to rebuild their sugar stockpiles after drawing on them in early 2010, when prices were high, was the reason international prices resumed their rally since June. Sugar contracts finalised earlier this month were done at a 30-year high price. However, Abdel-Hamid Salama, head of Delta company for Sugar, Egypt's largest producer of sugar from beets, believes the recent hikes in sugar prices locally has nothing to do with international prices getting on the rise. "If we factored in the increase in international markets, local sugar should have been sold at LE5-LE5.25 which is almost one pound less than its current level," he said. He noted that sugar mills sell their production to distributors and traders in the free market at LE4,000 per tonne which means that the increase is added from the side of the traders. The government mills cover the needs of ration card holders, 1.27 million tonne with two kilogramme stake per user at a unified price of LE125, in addition to providing the consumer cooperatives with subsidised sugar. In addition to using locally cultivated sugarcane and beets, these mills import raw sugar to refine it and sell it on the free market at an average price between local and international prices to face any problem in the sugar market. The supply side also includes private companies that import refined sugar. Salama pointed out that traders bought from international markets when the prices went down, they piled stocks betting on the possibility of increase in the prices and they got lucky, the prices reversed their direction and they are taking advantage of the situation. However, the fact that even subsidised sugar sold at the cooperatives reached LE4-4.5, according to Asfour, negates the claims that it is the traders who inflate the value as even the subsidised sugar is sold to distributors at a higher price. Both Salama and Asfour said they believe that the prices will not cool down before the New Year when the harvest season starts. The head of the Holding Company for Food Industries told the local press that Egypt has inventory that covers the local need till the end of December which coincides with the beginning of the new production season. On Monday, the Ministry of Foreign Trade and Industry said it is considering obliging sugar producers to write the price of each kilogramme on the sugar bags in order to combat any violations from traders. This comes as a part of a wider plan announced earlier this week by Minister of Foreign Trade and Industry Rachid Mohamed Rachid to rein in the increases. The cabinet decided to increase the state-owned Sugar and Integrated Industries Company (SIIC) imports of raw sugar used to cover ration card needs by 300,000-600,000 tonnes in 2011. Moreover, the company will interfere by injecting 100,000 tonnes of sugar in the free market (not for ration cards or for cooperatives), at a price of LE4,000 per tonne in case there was any shortage in sugar supply till January 2011. Also beet mills will import 600, 000 tonne of raw sugar and sell sugar traders in the free market at a maximum price of LE4,500 no matter how much the international sugar prices may be. Asfour believes that all these strategies are just pain killers in a case that needs a radical change in the way the market works. "We have to reduce our reliance on imports and increase the area cultivated with sugar and beets especially now that the area allocated to rice is narrowed. This should be a national policy to realise self-sufficiency of certain crop," he said.
