The government is trying to reign in runaway sugar prices while pulling the plug on a potential black market, Eman Youssef reports Consumers were shocked recently when retail sugar prices doubled overnight with the price of one kilogramme of sugar going from LE2.5 to LE5. To help stabilise sugar prices, the government responded by removing duties on imported sugar, which was set at LE500 per tonne. Sugar prices increased following an international rise along with a sharp decline in sugar production in India, the world's largest sugar exporting country, reflecting a reduction in global export availability, according to Sayed Abul-Qomsan, advisor on foreign trade to the minister of trade and industry. Egypt's local sugar production stands at 1.6 million tonnes, while consumption amounts to some 2.8 million tonnes. To balance the gap between production and consumption, private sector companies import some 150,000 tonnes, while government-owned companies import 300,000 tonnes. Imports mainly come from India, Brazil and Cuba. "As India and Brazil will not harvest their crops for another 18 months, world prices will remain unchanged until 2011," according to Ahmed El-Wakil, chairman of the Alexandria Chamber of Commerce and member of the Sugar Committee at the Ministry of Trade and Industry. Minister of Trade and Industry Rachid Mohamed Rachid has ordered all companies to maintain prices at LE4 per kilogramme with no increase. According to El-Wakil, sugar- producing companies currently have stock that they bought when prices were low, "which will be satisfactory to enable them to sell to consumers at LE4 per kilogramme for the next four months." "The government will supply sufficient quantities for 65 million ration cards to be sold for LE1.32 per kilogramme," El-Wakil said, adding that 71 per cent of produced sugar is subsidised, so only a small number of consumers will be affected by the price increase, and available quantities can cover all needs. To foil attempts at creating a lucrative black market from the difference between the market price of LE4 and LE2.75, the subsidised price offered by public sector companies, the government increased public sector prices to LE3.50, El-Wakil said. The decision to move public sector prices up and cancel import duties came as an effort to balance the interests of importers and consumers. There are around 20 government and private sector sugar factories operating in Egypt. And three new sugar factories will start operations next year with a production capacity of 250,000 tonnes annually. "Worldwide sugar prices have reached their highest level in nearly 30 years, as sugar cane production in India -- formerly a big exporter -- dropped," El-Wakil told Al-Ahram Weekly. India was the second biggest supplier of sugar after Brazil. Bad weather in many sugar cane growing countries, such as Brazil, contributed to the global shortage of sugar. According to El-Wakil, starting January 2009 the world price of sugar nearly doubled due to poor harvests in India and Brazil. India became a sugar importer for the first time. World production dropped to 158 million tonnes, while consumption amounted to 163.3 million tonnes in 2009, leaving a deficit of 5.3 million tonnes. Another source, who spoke on condition of anonymity, said the global shortage of sugar could be largely attributed to the fact that many growers prefer to invest in more profitable crops. Sugar cane plants remain in the ground for almost five years, during which producers cannot grow anything else, while beet-derived sugar grows in a few months but costs more in terms of maintenance. Ahmed El-Shafie, an economic analyst, emphasised that the recent rise in prices might lure some farmers back to growing sugar cane, but the question remains whether production will be enough to satisfy demand. El-Shafie commented that food prices in Egypt often rise with international prices, but never drop when international prices drop. He also said that companies that produce high- fructose corn syrup, a substitute for sugar, would benefit from rising sugar prices. Even now, with sugar prices up, demand would grow as consumers buy amid fears of further price rises, said Al-Wakil. The government estimates that national sugar consumption will be around 700,000 tonnes until the end of the year. Follow-up meetings will be held at the Ministry of Trade and Industry to regulate the sugar market.
