Colombian sugar production is expected to increase by 30,000 tons to 2.31 million tons in MY 2011/2012.
THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY
USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT
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Colombian Sugar Production and Exports Expected to Increase
Joe Lopez, Agricultural Counselor
Leonardo Pinzon, Agricultural Specialist
Colombian sugar production is expected to increase by 30,000 tons to 2.31 million tons in MY
2011/2012, and is forecast to remain unchanged at 2.31 million tons in MY 2012/2013. Sugar
exports are projected at 880,000 tons in MY 2012/2013, which is 2.3 percent above last year's. Ethanol
production capacity will expand by 300,000 liters, a 20 percent increase. Local consumption is forecast
at 1.65 million tons, a one percent increase.
Colombian sugar production is forecast to remain at 2.31 million tons in MY 2012/2013. The area
available for sugarcane in the Cauca river valley is virtually all planted and the area for expansion is
marginal. Increases in productivity and area will be devoted to ethanol production as new ethanol
facilities enters into production. Sugar exports are expected to increase by 30,000 tons, to 860,000 tons
in MY 2011/2012; this increase in sugar production will also increase the sugar availability for exports.
Colombian sugar exports are projected to reach 880,000 tons in MY 2012/2013. This is a
relatively small increase in exports due primarily to new ethanol expansion projects entering into
production, thus resulting in more sugar being taken away from exports for ethanol production. In
October, 2011, the U.S. congress ratified the CTPA which we believe will foster bilateral trade for sugar
and sugar containing products. Finally, the implementation of CTPA with the United States will be
effective May 15, 2012. Thus, Colombia gets a duty free TRQ of 50,000 tons of raw sugar equivalent
which will increase annually by 750 tons.
In MY 2011/2012, sugar production is expected to reach 2.31 million tons, which is 30,000
tons higher than the year before. Although “la Niña” weather phenomenon continued in 2011, lower
precipitations levels in the sugar cane areas allowed for increased sugarcane harvesting and
consequently higher sugar production. In the third quarter of 2011, the precipitation level decreased by
60% compared to the same period in 2010 level. As a result, in 2011 calendar year, sugarcane crushing
increased 12 percent compared to 2010. Sugar production is forecast to remain at 2.31 million tons in
MY 2012/2013. One factor that limits the increase in sugar production is the expansion in ethanol
producing facilities. As ethanol production capacity expands a larger sugarcane amount is devoted for
ethanol production. In 2013, ethanol production is expected to increase by 300,000 liters per day when a
new ethanol facility enters into production. The facilities for ethanol and sugar production are located
one near to the other which makes it more efficient for the input of sugarcane to be devoted for
processing either product. Changes in total production will depend on the weather which affects
conversion factors when processing sugarcane, and the program of land management by specific areas.
Colombia harvests sugar cane year-round which makes sugar and ethanol production a continuous
process. Sugar cane areas, sugar mills and ethanol facilities are located in the valley of the Cauca River.
This situation sets a limit to the area for sugarcane to be economically efficient, and in 2005 when
ethanol facilities projects became a reality the area available was almost covered and since then,
increases in the area planted have been marginal.
In 2011, the sugarcane area planted in the valley of Cauca was calculated at 215,000 hectares, 8,000
hectares higher than a year before stimulated by strong sugar prices. It is calculated that 18 percent of
this area is devoted to ethanol production. Colombia is reported as the most efficient sugarcane producer
in Latin America with 120 tons of sugarcane per hectare followed by Guatemala, 100 tons, Brazil 80
tons, and Mexico 70 tons of sugarcane per hectare respectively.
The Colombian sugar industry is actually a cluster around sugarcane; sugar, ethanol, food industry and
also power generation. In 2005 ethanol production entered into the cluster thus impacting sugar
production and allocation into the local and external market. Ethanol production substitutes partially
sugar exports, and began to compete with sugar production in late 2005. In 2011, ethanol production
reached 337 million liters and its plant capacity reached 1.3 million liter per day.
The sugar industry, through its Researching Center –CENICAÑA-, has been focusing in developing
programs of land management by specific areas to increase productivity given the land expansion
constrain. This program identifies different soil characteristics for small areas and then develops a
management program for that specific area. The industry expects that the implementation of this
program will take sugarcane production from 120 ton per hectare to 160 tons per hectare in 2020 year.
Colombia is the second largest non-centrifugal sugar (panela) producer in the world after India. In
2011, Colombian sugarcane area harvested for panela was 196,000 hectares out of 239,000 hectares
planted. Production reached 1.2 million tons of panela 100,000 tons lower than the year before due to
the impact of extreme rainfall. Post does not expect production of panela to change in 2012. Panela
production is distributed among 70,000 farms, and employs approximately 120,000 subsistence farmers
located throughout the country.
Consumption:In MY 2012/2013, Colombian sugar consumption is forecasted at 1.64 million tons, one
percent above from a year before. Consumption has been led by increasing demand from the
confectionary sector to meet increased exports of processed food products. Sugar mills will continue
to prioritize the Colombian refined sugar market because of higher prices and higher returns compared
to raw sugar exports.
Colombia has 13 sugar mills all located in the geographical Valle of Cauca River, and 5 of them
produce ethanol as well. Colombia is a net sugar exporter and Colombian sugar exports are sensitive to
international prices and to increases in ethanol production as part of the sugar cluster. Due to strong
international prices exports are expected to increase from 830,000 tons in MY 2010/2011 to 860,000
tons in MY 2011/2012. We also anticipate sugar exports to reach 890,000 tons in MY 2012/2013 due to
the expansion in ethanol production which will take more sugarcane otherwise devoted to sugar
production for exports. Colombian sugar producers continue their efforts in order to increase markets
for exports of higher priced refined sugar. In MY 2010/2011, 70 percent of total Colombian sugar
exports were high-priced sugar.
Chile continues as the first destination for Colombian sugar exports, which in MY 2010/2011reached
262,000 tons, 44 percent higher than the year before, followed by Peru and Haiti. In MY 2010/2011,
Chile represented 32 percent of total Colombian sugar exports and the United States 5 percent. The
sugar exported to the United States surpassed by 56% the sugar quota assigned for fiscal year 2010.
Colombia’s sugar imports decreased to 160,000 tons in MY 2010/2011, and it is expected to increase to
170,000 tons in MY 2011/2012, due to increase in domestic consumption and exports. Brazil, Bolivia,
Guatemala and Peru supplied 98 percent of the total Colombian imports. Imports from Bolivia and
Ecuador enter duty free under the Andean Community agreement, and Brazil is granted a duty
preference compared to other suppliers under the Regional Preferences of the Latin America Integration
Stocks:Colombia produces sugar year-round and is able to supply the market on a regular basis and
without disruptions, so there are not programs or incentives for sugar mills to keep inventories
according to our sources. Private sector sugar working inventories which includes product in transit to
exporting markets, are projected to reach 375,000 tons in MY 2011/2012, 15,000 tons lower than the
year before. In MY 2012/2013, it is forecast that inventories would decline by 40,000 tons, to 335,000
In early November 2010, the High Council of Foreign Trade advised the Colombian Government to
reduce import tariffs aimed to reduce production costs, unemployment rate, the tariff dispersion, and to
simplify the custom administration and eliminate the bias against exports. As a result, Colombia
reduced import duties on November 5, 2010 for over 4,000 tariff lines (Decree 4114 and 4115). The
average nominal import duty was reduced to 8.25%. In addition, due to the prevalence of high world
prices for agricultural products, the Colombia’s applied duties have not exceeded the WTO negotiated
bound tariffs. The main products that received tax reduction were consumer goods, capital goods, and
raw materials. The import duty on sugar and sugar products were reduced by 5 percent from its previous
duty. The import duty for sugar is now 15 percent. The sugar and sugar products will remain into the
price band system (see below).
Sugar Price Stabilization Fund (PSF)
Colombia produces sugar far in excess of its internal demand that convert it into a net exporter. The PSF
mechanism was established in 2001 to avoid an oversupply of internal market that would have lowered
prices at a point that would have made some sugar mills go out of business. This PSF set a market
weighted average price (MWAP), which includes prices from all markets, lower and high price markets.
Then, those mills that sell sugar into markets at prices above the MWAP will contribute to the PSF and,
conversely, for those mills that sell into markets at prices below the MWAP will receive compensation
from the PSF. In the end, exporter’s income reflects neither selling at a price that is as high as the
higher-priced markets nor as lower as the lower-priced markets. Historically, the markets of higher
prices have been the U.S. quota and the local market and the external markets the lower-priced.
Under the Andean Community regulations, sugar imports from other Andean Community countries are
allowed duty-free entry into Colombian market. Imports from outside the Andean Community are
subject to a variable duty under the Andean price band system. The basic duty rate on imports of raw
and refined sugar from non-Andean Community countries is 15 percent.
The Andean Community revises the band of prices, ceiling and floor, annually every April. The duty
adjustment is made based on whether a reference price is above or below the ceiling and floor price
respectively. The reference price is adjusted every two weeks. If the reference price falls within the floor
and ceiling prices band, the import duty is the basic tariff rate, 20 percent in the case of sugar, applied to
the invoice value. When the reference price falls below the floor price, a variable surcharge based upon
the difference between the floor price and the reference price is assessed. Conversely, when the
reference price exceeds the ceiling price, a reduction is made to the applied based upon the difference
between the reference and the ceiling price.
The Andean Community set the price band to be applied for the period April 2012 to March 2013 as
follows, which is an increase for the third consecutive year, as noted below:
Andean Community Price Band
April 2010 to March 2011
Floor Price Ceiling Price
$ per ton $ per ton
April / March April / March
2011/12 2012/13 2011/12 2012/13
Raw Sugar 364 428 471 588
Refined Sugar 470 535 585 699
Source: Andean Community
For the first two weeks of April 2012, reference prices for raw and refined sugar were set at $565/ton
and $670/ton respectively. Thus, Colombia’s current total effective duty is 15 percent, which is the
basic duty on imports of raw and refined sugar given that the reference prices for both products
are within the floor and the ceiling price.
Colombian Trade promotion Act (CTPA)
In October, 2011, The US Congress ratified the FTA and the Colombian government is adjusting its
legislations and custom procedures for the implementation. The price band duty system will be
eliminated for imports from the United States upon implementation. The agreement set a TRQ of 10,500
tons for glucose, which includes high-fructose corn syrup that increases 5 percent annually for 10 years.
At the same time, the basic import duty above the TRQ will be reduced from 20 percent by 2 percent
annually until it is eliminated at the end of the 10-year phase-out period.
Andean Community and Mercosur
Andean Community members (Peru, Ecuador and Bolivia) have free access to Colombia’s sugar
market, as does Colombia to each of their markets. Under the Colombia/Mercosur free trade agreement,
which entered into effect in February 2005, sugar was largely excluded. Colombia maintains the price
band system and there was no agreement reached on when tariff reduction would begin. However,
Colombia continues to grant duty preferences under previous bilateral agreements such that Mercosur
members pay only a percentage of the basic duty rate. The actual duties paid are as follows: Argentina
and Brazil 13.2 percent for raw and refined sugar; Paraguay 9.9 percent on raw and refined sugar; and
Uruguay 12 percent on raw and refined sugar.
The price for local sugar in Colombia is mainly based on international sugar prices adjusted with
transportation costs and import duties to the local market. The duty for sugar is a variable duty under the
Andean price band mechanism (see price band above). The New York Commodity Exchange price is the
basis for raw sugar and the London Sugar Exchange price is the basis for refined or white sugar. In
2011, the average price for raw sugar at NYCE was $ 0.27 per pound and the average price for refined
sugar at $0.32 per pound; both were the highest average price ever.
Production, Supply and Demand Data Statistics:
Sugar, Centrifugal Colombia 2010/2011 2011/2012 2012/2013
Market Year Begin: Sep 2010 Market Year Begin: May 2011 Market Year Begin: Sep 2012
USDA Official New Post USDA Official New Post USDA Official New Post
Beginning Stocks 405 405 350 390 375
Beet Sugar Production 0 0 0 0 0
Cane Sugar Production 2,200 2,280 2,250 2,310 2,310
Total Sugar Production 2,200 2,280 2,250 2,310 2,310
Raw Imports 0 0 0 0 0
Refined Imp.(Raw Val) 160 160 170 170 180
Total Imports 160 160 170 170 180
Total Supply 2,765 2,845 2,770 2,870 2,865
Raw Exports 250 250 250 250 250
Refined Exp.(Raw Val) 540 580 550 610 630
Total Exports 790 830 800 860 880
Human Dom. Consumption 1,620 1,620 1,620 1,630 1,645
Other Disappearance 5 5 5 5 5
Total Use 1,625 1,625 1,625 1,635 1,650
Ending Stocks 350 390 345 375 335
Total Distribution 2,765 2,845 2,770 2,870 2,865