Abstract
In BMI' s Bangladesh Agribusiness Report for Q3 2009, we introduce the new
Sugar Outlook. As with
many sectors of Bangladesh' s agricultural sector,
sugar production is blighted by inefficiency. Average
sugar cane yields at
38.49 tonnes per hectare (tonnes/ha) in 2008 are among the lowest of any
significant
sugar producing country, only just over half of the world
average of 71.72 tonnes/ha and well below the
65.76 and 53.00 tonnes/ha
achieved in neighbours India and Pakistan, respectively. Sugar cane
production
has been on a long-term downward trend and in 2008 production
fell to its lowest level since 1963.
Farmers have been abandoning the
meagre rewards on offer for cane and moving to other, more profitable
crops.
The processing sector is also struggling. The country has 15
state-run mills active in cane crushing. The
mills make an annual loss
running into millions of dollars. Plans to privatise the sector have been
slow
moving. The Bangladesh Sugar and Food Industries Corporation (BSFIC),
which oversees the mills, has
been consistently seeking more government
protection for the domestic sugar production sector in the
form of higher
tariffs on sugar imports.
With sugar consumption in Bangladesh reaching
1.15mn tonnes in 2008, compared to production of only
175,000 tonnes,
there is a large domestic market to supply if sugar can be produced profitably
in
Bangladesh. In 2009, however, sugar production is expected to fall
sharply to little over 80,000 tonnes
owing to a shortage of sugar
cane.
There is no reason why Bangladesh should not be able to supply more
of its sugar requirements from
domestic production. Neighbouring India has
produced a surplus in sugar for many years of this decade.
However, we do
not see the country' s sugar sector improving while it is still in state
hands.
In other sectors, Bangladesh is set for a bumper rice harvest in
2009, up by a forecast 14.1% from the
2008 level. This has been achieved
through an increase in the cultivated area and good weather conditions
seeing yields rise. Unfortunately for the millions of Bangladeshi rice
farmers, the large crop and poor
economic conditions has seen prices fall
to below the cost of production. While a government
procurement drive will
provide some relief, many farmers will still be hard pushed to turn a profit
on their
crops.
Helping to alleviate the difficulties caused by
falling prices will be a BDT15.00bn (US$218mn) stimulus
package announced
for the agricultural sector in April as part of a total BDT34.24bn
(US$495mn)
package designed to help Bangladesh through the worldwide
economic slump. The money will ensure
that struggling farmers will have
access to loans to help tide them over.
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