Pakistan's sugar spills onto world market

Pakistan was previously suffering from drought

Pakistan is likely to join the ranks of the world's sugar exporters thanks to good monsoon rains, US agriculture officials have said.

But Pakistan's sugar growers face the prospect of selling their crop in a glutted market where prices are falling steeply.

The squeeze on prices paid to sugar farmers has increased trade frictions, and prompted emergency support from governments over recent months.

Pakistan's sugar output is likely to increase by 18% in the season to next September, a report for the US Department of Agriculture (USDA) said.

Falling world prices

Farmers have shifted some cotton growing land to cane production due to "decreasing returns in cotton cultivation" and improved local prices for sugar, the report said.

Good rains have increased yields too.

US officials now expect Pakistan to produce 3.78 million tonnes of sugar in the 12 months to September 2003, rather than the 3.12 million tonnes previously predicted.

Pakistan produced 3 million metric tons in the 2001-02 growing season.

Brazil, the world's biggest exporter of cane sugar, is harvesting a record crop for the second year in a row.

Producer prices for wholesale refined sugar have fallen by almost a quarter in the last five years, the USDA said in February.

This year, sugar futures prices have dropped by 8.5% on the New York market.

Protection policies

Many sugar producing countries, including Pakistan, have taken steps to protect their sugar growing farmers from competition.

Pakistan slapped a 25% tax on sugar imports in June after refiners and grower complained that imports of refined sugar were about $100 cheaper per tonne than locally grown refined sugar.

Brazil and Australia have joined forces to file a complaint with the World Trade Organisation about EU sugar subsidies.

Sugar was also one of the crops protected by controversial US farm subsidies announced earlier this year.

The Australian government has agreed on a package of measures worth A$150m (£52m; $81m) to support sugar farmers, and Fiji's prime minister has taken personal charge of restructuring of the country's loss-making state-run sugar industry.

Compared with Brazil's expected crop of 23 million tons in the current harvest, Pakistan is a small grower.

But 44% of Pakistan¿s workforce depends on agriculture.