Hyper Cost of Sugar Putting Ethiopia in a Fix

Hyper Cost of Sugar Putting Ethiopia in a Fix

Sugar supply is in trouble following two failed attempts to import it and the inability of local factories to produce enough to meet demand.

A UK company was to supply 50,000tn of sugar at 431 dollars per tonne in the beginning of October. But the company withdrew from its commitment leaving the money it deposited with the Ethiopian Sugar Development Agency as a guarantee for supply, because the price had appreciated by 39 dollars. A second tender was subsequently issued, and one of the two companies that were selected to make the supply at 474 dollars per tonne retreated while they were processing letters of credit, because the price had once again appreciated, this time to 550 dollars. This company is said to have sold the sugar that was destined for the Ethiopian market elsewhere, because the profit at the new high price was more than the 1.4 million Br it had deposited at the agency.

The price of sugar has gone up in a few months from 380 dollars to 650 dollars per tonne, or around 8.30 Br per kilo at current exchange rates. The agency says that it cannot stabilize the local market by importing sugar at this price. The local sugar tender a week ago comprised of 70pc imported and 30pc manufactured by Metehara Sugar Factory. Fincha and Wonji Shewa sugar factories were still undergoing their annual maintenance and had not started production yet.

The agency used to auction 160,000ql of sugar every two weeks using new production, imported sugar and supplies from stock. Last week, however, only 100,000ql were auctioned, according to an expert at the agency. A quintal of sugar was sold for 1,199 Br during this auction.

The three factories have a capacity of 2.7 million to three million quintals. The agency imported one million to 1.5 million quintals to satisfy the total demand of 4.4 million quintals.

“Luckily, the factories have now completed their annual maintenance, but we will still need to import more sugar,” said an expert at the agency.

The agency uses money provided by the Ethiopian Sugar Development Fund. It pays back the money after the sugar is sold. 

The expert says that if sugar is imported at the current world market price of 650 dollars per tonne or 8.30 Br per kilo, the local price could go up to 15 or 20 Br.

“The sugar we used to sell for 1,100 Br was the one we imported at 474 dollars per tonne,” said Belay Dechasa, director of the agency.

Belay says that all of this will become history when the expansion projects at existing factories are completed and when the new Tendaho Sugar Factory goes operational. 

“Ethiopia will turn from an importer to an exporter,” he said, speaking to journalists two weeks ago. 

The three factories are expected to double their production to around six million quintals while Tendaho could produce just as much. The Ministry of Trade and Industry estimates that Ethiopia could have a two percent share of the world sugar market.

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