How East Asian countries making a kill on Philippine sugar

Why there are buyers for Philippines Sugar despite it is reportedly lacking in quality? Or is it that buyers of the Philippine sugar, like Japan, South Korea and Indonesia are making a neat kill?

In fact, Filippino traders are desperate to find buyers for its raw sugar and to lure customers, are offering sugar at a discount of $30-$35 a ton. As on August 12, Japan, South Korea and Indonesia have booked import orders for about 66,000 tons of sugar even as Philippines wants to sell about 2 lakh tons(0.2mn tons).

The country wants to clear the glut and ease the warehouses to stock sugar that would arrive in the ensuing crushing season.

This has prompted them to offer sugar at discount rates, and with buyers lacking other than the three countries mentioned, is in for price erosion.

Sugar quality is often measured in terms of ICUMSA (International Commission for Uniform Methods of Sugar Analysis). The whiteness of sugar adds to the ICUMSA content. The more the ICUMSA, the better; but admittedly, this is just a question of perception. If you are a customer, then you buy sugar looking at the whiteness and fine nature of the same, or in other words, the ICUMSA content.

Here one has to remember that sugar is mostly consumed in an indirect manner through bakers’ products and confectioneries where ICUMSA or perceived quality is secondary. If sugar is mellow, but edible and consumable, then the ICUMSA content or the whiteness of sugar does not matter at all when it is processed into syrup or other form.

Philippines classification of sugar runs into four categories.

‘A’ category sugar that makes for 4% of stocks and targeted at the US markets, alone.

‘B’ category sugar intended for domestic consumption which accounts for 90% of domestic stocks.

‘D’ category Sugar intended for non-US exports and for which there is no fixed volumes.

‘C’ category sugar or reserve sugar that can be converted to fall in any of the above categories.

This means, Japan, Indonesia and South Korea are receiving ‘D’ category sugar. Given that both Japan and South Korea are developed economies and where standard of living is high, compromise on quality of sugar is unthinkable. And given that sugar is mostly consumed in an indirect way, ICUMSA preferences are secondary.

Accordingly, the perception of poor quality of raw sugar may not be valid at all and Japan, South Korea and Indonesia are making a neat kill!

Is China listening?

Of course, they are, but to Brazilian sugar industry; ignoring the voices of Thai sugar.

Compared to the quality of raw sugar being supplied from Brazil, Reuters cited sources saying that Thai sugar is not up to the mark!

"Chinese buyers even accept higher freight costs to buy from Brazil because the quality is better. Some Chinese buyers said Thai raw sugar gives lower yield when it was processed into white.” Reuters said.

But there is yet another factor that is playing out here. Given the volumes that China requires (to the tune of 2 million tons), importing sugar from Thailand can be more expensive as Chinese demand can perch up Thai prices to break the roof.

So, China may find it more profitable to import sugar from Brazil, the freight costs notwithstanding.

But, China is not a game changer in sugar industry. India is!

Chinese sugar consumption is relatively low when compared to India. Chinese mostly consume Saccharin, an artificial sweetener.

As published in: http://www.commodityonline.com/news/How-East-Asian-countries-making-a-kill-on-Philippine-sugar-41665-3-1.html