Fatima Sugar Mills Chairman's Message
On behalf of the Board of Directors of Fatima Sugar Mills Limited, I am pleased to welcome you to the Company's website.
International Scenario
Uncertainty and high volatility in sugar prices in the international market like the London white sugar market which was trading at $ 330/Ton in November 2008 has jumped to $625/Ton in November 2009 and dipped to $425/Ton in June 2010 and again jumped to $725/Ton in November 2010 and a 30 year record of $800/Ton in December 2010.
Domestic Market
The Sugar price in the local market was deeply affected by the price variation in the international market, the uncertain demand and supply position and the cost of production.
The national sugar production has maintained its declining trend for the second consecutive year and was as low as 3.0 million metric tons as compared to 3.2 million metric tons the previous year and was lower than the peak production of 4.74 of million tons in the season 2008 which depicts a huge swing in crop size.
Based on the annual national demand of 4.2 million metric tons consumption, the Trading Corporation of Pakistan was mandated to import l.2 million metric tons of refined sugar to plug the deficit, however, bureaucratic hurdles and lack of financial resources kept the import pending and Pakistan could not import the commodity at the right time, at competitive prices and from the nearest markets. In addition, a market intervention mechanism was not used in effective manner and a hypothetical shortage was created in the market as soon as the Sugar Mills have depleted their stocks. By October 2010, as stocks with sugar mills dwindled to Nil it created a short term panic like situation and prices of the commodity escalated to unprecedented levels.
In the above circumstances when an uncertainty was prevailing in the market the company played a positive role and established letter of credits / executed contracts under CAD arrangement for import of sugar in order to redress shortage of sugar in market. Eventually import of sugar by private sector and flooding of sugar by TCP in the market resulted in price stabilization. We are confident that the market will further stabilize.
Future Outlook
The company commenced its crushing season of 2010lIon November 25, 2010. The Government of Punjab has fixed the sugarcane support price of RS.125 per 40 kg for the season 2010-11, this increase in minimum price translates to an increase of 25% in the basic cost of sugar manufacturing moreover similar to the previous season, the millers are again facing shortage of sugarcane and price war has started amongst the sugar mills which ultimately will increase the sugar manufacturing cost. A positive view of all the adverse circumstances is that the real beneficiaries of the high sugar prices are the sugarcane farmers and we hope that the extraordinary returns from sugarcane farming would encourage farmers to plant more sugarcane and the mill will achieve their 100 percent Crushing capacity. This all will ensure that the country is again self sufficient in the sugar.
The trend in cultivation has been positive and despite the flood in certain areas we expect national sugar production will increase by approximately 20 percent this year. Since world wide sugar production is expected to remain short for third consecutive year, the international and local prices of sugar will remain high. This scenario is very optimistic for the industry as it allows mills to pay high prices for sugar cane and yet have a healthy processing margin.
Fawad Ahmed Mukhtar
Chairman
Fatima Sugar Mills Limited
