Report Highlights: 

Cane sugar production for CY2013 is estimated at 1.16 MMT, up from 1.1 MMT in CY2012. Peruvian sugar exports in CY 2013 are forecast at 70,000 MT. In CY 2012 the United States was the largest market for Peruvian sugar with 45,970 MT, followed by Colombia with 8,320 MT. 

Executive Summary: 

Cane sugar production for CY2013 is estimated at 1.16 MMT, up from 1.1 MMT in CY2012. This 5 percent increase is explained by favorable weather conditions, particularly sufficient water supply, and investments in new plantations. Sugar cane production is forecast at 10.4MMT in CY 2013. Sugar in Peru is produced in the rich northern valleys along the coast. Cane sugar consumption is forecast at 1.27 MMT in CY 2013, around 70 percent of which is for direct consumption and the remaining for industrial use. 

Production:

Cane sugar production for CY2013 is estimated at 1.16 MMT, up from 1.1 MMT in CY2012. This 5 percent increase is explained by favorable weather conditions, particularly sufficient water supply, and investments in new plantations. Post believes that Peru’s sugar production will continue increasing in the foreseeable future due to ongoing investment in renewing fields, new plantations, and more efficient processing plants. Peru will probably become self sufficient, and even have a sugar surplus, in the upcoming years. 

Sugar cane production is forecast at 10.4MMT in CY 2013. Sugar in Peru is produced in the rich northern valleys along the coast. The region of La Libertad produces 51 percent of the Peruvian sugar, followed by Lambayeque and Lima with 27 percent and 15 percent respectively. Peru’s milling capacity is 37,000 MT of cane per day. Since sugar cane in Peru is produced year round, mills do not need to be very large. Yields and cane age vary greatly from one producer to another.

Yields range from 53 to 190 MT of cane per hectare and age varies from 13 to 18 months between cuts. Average yields in CY 2012 were 128 MT per hectare, up 4 percent compared to the previous year. Total harvested area in CY 2012 was 81,149 hectares. 

Production costs also vary considerably, with fuel being one of the most important factors. Fuel utilization ranges from 5 to 90 gallons per metric ton of sugar produced. The Peruvian northern coast has excellent conditions for growing sugar cane due to high temperatures and lack of rain. All cultivation is surface irrigated, allowing producers to cut the supply of water at a given time to obtain higher sucrose yields. Under normal weather conditions, and provided the cane is milled on time, sucrose yields are around 12 percent.

Peru’s sugar industry continues its consolidation process. Coazucar, owned by Peru’s largest dairy processor Gloria, owns Casa Grande, Cartavio and San Jacinto. Casa Grande has access to 30,000 hectares, but only about 15,155 hectares are under production. Casa Grande could at least double its sugar production very rapidly by both planting currently idle lands and improving yields through technological changes. Ethanol production is also an important project that investors are evaluating. 

The Peruvian northern coast continues undergoing an economic improvement process driven by private investment. Land is being purchased by Peruvian and foreign investors, and property is being consolidated. The efficiency brought about by economies of scale is improving return rates, which attracts more investment, generating a beneficial cycle. It is quite common to see bulldozers flattening sand dunes to plant more sugar in the desert. This process is undoing the damage done by the catastrophic 1968 land reform that expropriated land to give to workers in socialist type cooperatives.

However there still are two mills, Pomalca and Tuman, where the government has shares and that have not been able to find a strategic partner to improve its efficiency and economic results. In an effort to encourage investment in these companies, the government is auctioning its shares to interested private sector companies. Government acquired shares were the result of a conversion of unpaid taxes.

Consumption: 

Cane sugar consumption is forecast at 1.27 MMT in CY 2013, around 70 percent of which is for direct consumption and the remaining for industrial use. As the Peruvian economy improves, sugar demand will increase, especially for sugar based beverages and confectionary products. Average retail price in CY 2012 was $1.19 per kilogram for refined sugar and $1.05 per kilogram for brown sugar.

Trade: 

Peruvian sugar exports in CY 2013 are forecast at 70,000 MT. In CY 2012 the United States was the largest market for Peruvian sugar with 45,970 MT, followed by Colombia with 8,320 MT. The U.S. sugar tariff-rate quota (TRQ) is an important incentive for Peruvian exporters. The U.S. TRQ is distributed among the sugar mills by the Ministry of Agriculture, in coordination with the Peruvian Sugar and Biofuels Producers Association (APPAB). 

Colombia, Guatemala and Brazil were Peru’s most important sugar suppliers in CY 2012, with 56, 20, and 11 percent of the market share respectively.

U.S. – Peru Trade Promotion Agreement (TPA)

The U.S. - Peru Trade Promotion Agreement includes five-year linear tariff reductions for glucose and fructose. These reductions start at a tariff level of 17 percent and 30 percent for glucose and fructose, respectively, with duty free access in six years. However, since the Agreement entered into force, Peru unilaterally eliminated import duties for sugar.

Policy: 

In April 2010, due to the unusual price increase of local sugar, when international sugar prices were falling, the government published a Supreme Decree declaring the sugar sector in emergency. As a result of this situation, the Ministry of Agriculture established a sugar monitoring committee (Technical Group) to “assess, evaluate and propose alternatives to improve the performance of the sugar industry.” This committee drafts a supply and demand report before approving shipments for export, including to the United States under the TRQ. The committee is formed by representatives of the Ministry of Agriculture and private sector