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USDA GAIN: Oilseeds, Cotton, Sugar, Grain and Feed


29 April 2013

USDA GAIN: El Salvador Sugar Annual 2013USDA GAIN: El Salvador Sugar Annual 2013

Sugarcane planted area in 2012/2013 is slightly higher then in 2011/12 reaching 64,000 hectares (ha). The Salvadoran Sugar Council (CONSAA) continues to regulate sugar trade. In Marketing Year (MY) 2012, most sugar exports were destined for Canada, Chile, South Korea and to the U.S. re-export market. High international prices continue providing financial relief to the sugar sector. The sector continues to get tariff protection from the Government of El Salvador (GOES). The Ministry of Agriculture (MAG) continues efforts to shift traditional agriculture to more profitable non-traditional export crops. The law for production of alternative fuels, including ethanol, continues to be "on hold" and there is no set date for its entry into force.
USDA GAIN Report - Oilseeds, Cotton, Sugar, Grain and Feed

Production

Recent production numbers compiled by FAS office in San Salvador show that the 2012/13 sugarcane harvest is expected to reach 5.99 MMT. Sugar production is estimated to be 695,000 MT in 2012/13.

These positive production numbers are a direct result of the local sugar industry working to control sugarcane burning during harvest, to create new sugarcane varieties that are more resistant to pests and diseases, and to increase investment in the sugar milling process. Sugar production is expected to increase slightly in 2013/14 reaching approximately 700,000 MT.

Area planted grew to 64,000 hectares (ha) during 2012/13 mainly due to positive international sugar cane prices. Planted area could increase in the near future if the ethanol production law is implemented since there is ample idle land in the country that can be devoted to increased sugarcane production.

Grower prices continue to be set according to the sugar content of the cane. According to the sugar law, producers receive 54.5 percent of total sugar sales, with the rest appropriated by sugar mills. The mills distribute this sales income among sugar producers based on the amount of sugarcane they provided. Continued investment on part of all sugar mills has helped reduce downtime during the milling process, as well as increase sugar recovery rates to a more competitive position within the region.

Consumption

Continued increased consumption by the candy and juice industry continues to provide stability to internal consumption numbers with domestic consumption reaching 285,000 MT in 2012/13. Higher exports of these products, due to opportunities provided by the CAFTA-DR Free Trade Agreement, could contribute to increased consumption in the medium term. Post estimates 2013/14 consumption at 290,000 MT; however consumption numbers will ultimately depend on the recovery of a sluggish Salvadoran economy.

Trade

Exports for 2012/13 are expected to reach 419,000 MT; the export forecast for 2013/14 is 425,000 MT.

The GOES continues to impose a 40 percent ad-valorem import tariff on all sugar; the bound rate is 70 percent as the GOES considers sugar politically sensitive because it is an important driver of rural income and employment. Even though CAFTA-DR has spurred regional tariff harmonization to avoid triangulations and market disruptions, the Central American region still has not agreed on a harmonized import tariff for sugar.

Chile and the U.S. re-export markets are major destinations for Salvadoran sugar exports. In MY-2012, 55,179 MT were exported to Chile. Other important destinations include Canada, South Korea and Taiwan. Export destinations for 2013 are expected to be similar to 2012.

Stocks

Ending stocks in 2012/13 are estimated at 27,000 MT. Contraband sugar from neighboring countries is under control and no longer causes a disruption to the local market. The national sugar law states that all sugar sold locally must carry a safety seal provided by CONSAA. Stock levels are expected to decrease by approximately 15,000 MT in 2013/14.

Policy

The GOES continues to require that all sugar sold in the local market be fortified with vitamin A to reduce blindness in the local population. Both producers and millers share this cost. The GOES has not designed a specific production support or assistance program for the sugar sector; instead, limiting market access through import tariff protection continues to be the leading support mechanism.

Under the national sugar law, CONSAA is in charge of regulating the sector. CONSAA has a board of directors which includes members from the government, sugar producers, and sugar mills.

A law for the production of alternative fuels, including ethanol, is still under review by the Government of El Salvador (GOES). Under the previous GOES administration there was agreement with the sugar industry on a 10 percent mix for ethanol and with gasoline. But thus far, the current government administration has not decided on enactment of this law arguing that they need to make sure that it is beneficial and has no negative impact on the environment and on consumers.

The following are some of the areas where the sugar industry continues working to improve sugar profitability:

  • Production of only the amount of sugar that can be sold at profitable prices;
  • Improvement of milling yields;
  • Diversification of mill income by focusing on energy generation;
  • Improvement of sugar cane varieties to have better sugar recovery yields and higher quality sugar;
  • Exchange of research and technology with other sugar producing countries; and
  • Introduction of new sugarcane varieties that are pest and disease resistant.

April 2013

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