- At Fitch Solutions, we anticipate that Colombian sugar production will reach 2.3mn tonnes in 2021/22, representing 2.7% y-o-y growth, and maintain this production level during 2022/23.
- We expect Colombia to continue to fill its US-Colombia Trade Promotion Agreement (CTPA) and World Trade Organisation (WTO) quotas and no significant change in exports.
- Consumption is forecasted to slow, despite GDP growth of 10.2% in 2021 and forecasts of continued growth in 2022, due to high food inflation.
- We expect the election of President Petro to have no impact on our near-term forecasts. However, we identify the election result as a potential risk to our long-term outlook for Colombia's sugar industry.
At Fitch Solutions, we forecast Colombia’s sugar production to reach 2.3mn tonnes in 2021/22, representing a y-o-y increase of 2.7%, and maintain this production level throughout 2022/23. With few opportunities for further expansion and almost all the available land for sugarcane completely planted, changes in productivity are entirely dependent on technological advancements and changes in weather conditions. Following excessive rains during 2020/21, brought about by La Niña, sugar production fell 4.7% y-o-y. Despite La Niña persisting throughout 2021/22, its impact has been less severe, and weather conditions are expected to return to normal in the second half of 2022. However, elevated input costs, such as fertilisers, counterbalance the positive effect of a return to normal weather conditions throughout 2022/23. Primarily relying on Urea, prices have risen from an average monthly spot price of $331.63 to $925, representing an increase of 178.93%. While we expect fertiliser prices to have peaked, they will likely remain at elevated levels, reducing usage and preventing yields from reaching maximum levels.
Sugar Production Remains Stable With A Moderate Increase In 2021/22 Before Levelling Off In 2022/23
Colombia - Total Sugar Production (000 tonnes)
Next, Colombia will continue to benefit from the CTPA and WTO quotas and the Andean Community free trade area (CAN), and we expect no significant change in trade throughout 2022/23. Accounting for around 37% of Colombian exports, Chile and Peru are expected to remain important export destinations for Colombian sugar through their membership in the CAN free trading area. We expect Colombia to continue to fill its WTO and CTPA quotas, maintaining the USA as a vital destination for Colombian sugar, representing 26% of exports. Exports to the USA are likely to be negatively impacted by a reduction of 6,703.43 tonnes, representing a decline of 18.4 % from current levels, only partially offset by an increase in the CTPA quota of 826.73 tonnes, a 1.32% increase. However, we expect strong global demand and high international prices to offset the impact of a reduction in the WTO quota on Colombia’s export volume.
Peru, Chile And USA To Remain The Main Export Markets
Share of Colombian Sugar Exports (%)
We anticipate that domestic consumption will increase 3.1%, reaching 1.87mn tonnes during 2021/22 before being pegged back marginally to 1.84mn tonnes in 2022/23. Following a 5.9% GDP contraction, the Colombian economy grew 17.8% in 2021 and is forecasted to achieve a GDP growth of 10.4% in 2022. Strong GDP growth has bolstered domestic consumption. Based on the solid macro-economic outlook, we have predicted consumption to increase in 2021/22. With GDP growth forecast by Fitch Solutions at 8.2% during 2023, we expect domestic consumption to remain strong, forecasting 3.9% above the 10-year average. However, our outlook for 2022/23 represents a y-o-y decline of 1% as food inflation pegs back consumption.
Food Inflation Offsets The Impact Of Economic Growth On Domestic Consumption
Colombia - Domestic Sugar Consumption (000 tonnes)
We at Fitch Solutions identify the election of President-elect Gustavo Petro as a potential risk to our long-term outlook for the Colombian sugar industry. With little detailed policy information during the election campaign and uncertainty surrounding President-elect Petro's ability to pass through legislation, the impact of his presidency on the sugar industry remains speculative and uncertain at this stage. President-elect Petro's rhetoric, such as declaring the commodity more dangerous than cocaine and marijuana and indicating a will to reduce the 250,000ha Colombia currently dedicates to sugar production, increases the likelihood of a government hostile towards the industry. While this potentially threatens our positive long-term outlook, we determine this risk to be minimal. President-elect Petro's ability to bring about significant change will largely depend on whether he can declare a state of emergency and increase his presidential powers, which is currently deemed unlikely. In the short term, we see no immediate risk to our forecasts from the election of President Petro.
|Sugar Production, '000 tonnes||2300.0||2500.0||2400.0||2350.0||2240.0||2300.0||2300.0||2366.0||2420.0||2425.0|
|Sugar Production, '000 tonnes, % growth y-o-y||2.2||8.7||-4.0||-2.1||-4.7||2.7||0.0||2.9||2.3||0.2|
|Sugar Production, % of global||1.3||1.3||1.3||1.4||1.2||1.2||1.2||1.2||1.2||1.2|
|Sugar Consumption, '000 tonnes||1900.0||1763.0||1862.0||1816.0||1872.0||1853.3||1871.8||1894.3||1920.8||1945.8|
|Sugar Consumption, '000 tonnes, % growth y-o-y||2.9||-7.2||5.6||-2.5||3.1||-1.0||1.0||1.2||1.4||1.3|
|Sugar Consumption, % of global||1.1||1.0||1.1||1.1||1.1||1.0||1.0||1.0||1.0||1.0|
|Sugar Consumption, kg per capita||38.8||35.5||37.0||35.7||36.5||36.0||36.2||36.6||36.9||37.2|
|Sugar Production balance, '000 tonnes||400.0||737.0||538.0||534.0||368.0||446.7||428.2||471.7||499.2||479.2|
|Sugar Self sufficiency, %||121.1||141.8||128.9||129.4||119.7||124.1||122.9||124.9||126.0||124.6|
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