GLOBAL SUGAR BUSINESS

A case Study of Bangladesh

Submitted to
Dr. MD. Hasibur Rashid
Professor
Dept. of MIS
University of Dhaka

Submitted by:
1. Md. Rahat
2. Abid Hossain Khan
3. Sraboni Debnath
4. Farjana Yeasmin
5. Niaz Mahmud

06-02
06-45
06-56
06-64
06-65

Acknowledgement
Completion of this report has made us grateful to a number of persons. First of all I
would like to acknowledge my teacher Dr. MD. Hasibur Rashid who gave us the golden
opportunity to do this wonderful report, which also helped us in doing a lot of Research and we
came to know about so many new things. We are very grateful for giving us the valuable
opportunity to do our assignment and supporting us with knowledge and resources.

Preface
The production of sugar has
shaped our world throughout
the centuries. From its humble
beginning,
to
its
royal
induction it has now made a
household name as a necessity.
It has changed our society into
sugar addicts with a never
ending urge for sweetness.
Production of this craving has led to an over abundant consumption. Consumption so great that is
has defined humans through culture and history. The journey has marked the path of this once
less then famous compound into a substance that is in everything our society consumes today.
The history of sugar can be traced through the years as a milestone in many nations and as an
economical splendor. It is a crop that changed the meaning of the word sweet.
Sugar, chemically speaking, is an organic compound called sucrose, which is made up of two
simpler sugars. It is composed of twelve carbons, twenty-two hydrogens, and eleven oxygen
atoms. They form two structural rings, a glucose and a fructose ring. Sugar can be extracted from
many different sources. Throughout history sugar cane has been the most important. There are
six different types of sugar cane. The one know best is the Saccharum offcinarum which is the
main source of sucrose. The process of extraction is in a series of steps which involved a great
deal in precision of changing temperatures. Changing the state of the juices helps isolate the
sucrose from the rest. After the sugar cane has been chopped, grounded, pressed, and submerged
in liquid the temperature raises so the water can evaporate. At this point the water boils away
leaving the solution supersaturated. This means the liquid is holding an over abundant amount of
sucrose, a solution can do this at very high temperature. The liquid is slowly cooled and as it
does a crystallized substance forms. The crystal is the solid form of sugar and the syrup left
behind is molasses and is very sweet.

Abbreviations
BSFIC
ACP
EDF
EPA
EU
LDC
FBA
FIC
FJD
FNPF
FSC
FSM
FTLO
GDP
HRD
ICT
IMF
MFS
NIP
NLTB
PACP
PICTA
SCGC
SCOF
SPARTECA
SRIF
UK
US
WTO

Bangladesh Sugar & Food Industries Corporation

African, Caribbean and Pacific
European Development Fund
Economic Partnership Agreement
European Union
Least developed country
Farm Basic Allotment
Forum Island Countries
Fiji Dollar
Fiji National Provident Fund
Fiji Sugar Corporation
Fiji Sugar Marketing
Fair Trade Labelling Organization
Gross Domestic Product
Human Resource Development
Information and Communication Technology
International Monetary Fund
Minor Field Study
National Indicative Program
Landlords for Native Land
Pacific ACP
Pacific Island Countries Trade Agreement
Sugar Cane Growers Council
Sugar Commission of Fiji
South Pacific Regional Trade and Economic Cooperation Agreement
Sugar Research Institute of Fiji
United Kingdom
United States
World Trade Organization

Background of sugar in global perspectives:

Sugar is thought to have originated in New Guinea and was spread to Southeast Asia and India.
It is one of the oldest commodities in the world. Commercial production of sugar was started in
India in the fourth century. India has been known as the original home of sugarcane and sugar.
Indians know the art of marketing sugar since the fourth century. Today sugar is produced in 121
countries and the global production now exceeds to 120 million tons a year. Approximately 70
percent of total sugar is produced from sugarcane. The remaining 30 percent is produced from
sugar beet a role crop resembling a large parsnip grown mostly in the temperature zones of the
north. In the mid-18th century German scientists began to refine sugar from root vegetables.

Background of sugar in Bangladesh perspectives:

The climate of Bangladesh is considerably favorable for cane cultivation. In this country
sugarcane is the only raw material for production of white sugar As it is comparatively a drought
tolerant crop, its cultivation is mainly concentrated in the low rainfall bolt of the northern and
north western regions in the old districts of Rajshahi, Kushtia, Jessore, Dinajpur, Rangpur and
Bogra and also in the district of Dhaka and Mymensingh.
Sugarcane is one of the crops cultivated mostly around the world for sugar and lot of purposes.
Brazil is the largest sugarcane producer country in the world. Bangladesh also produces a portion
of the total sugarcane. And this sugarcane is the main ingredients for producing the sugar in all
over the world.

Bangladesh Sugar & Food Industries Corporation

Bangladesh Sugar & Food Industries Corporation (BSFIC) emerged as a single corporate body
from 1st July, 1976 due to merging of two separate Corporations vlz. Bangladesh Sugar Mills
Corporation (BSMC and Bangladesh Food & Allied Industries Corporation (BFAIC)which were
established under presidential Order No. 27 of 26th march , 1972.
Aims & Objectives of the Corporation:
Production of high yielding A high sucrose content sugarcane In mills zone through
extension activities,
Maintain stable price of sugar in the domestic market through efficient marketing.
To undertake BMR/BMRE works of existing sugar mills as well as to take steps for establish
sugar mills with a view to attain self- sufficiency in sugar.
Regaining Bangladesh market for sugar mill machinery
In 2011 Prime Minister Hasina Wajed announced to make the eight loss-incurring sugar mills
profitable through undertaking balancing, modernization and replacement (BMRE) and
diversifying the products/bye-products by installing ethanol refineries and distilleries in another
three sugar mills.
Bangladeshs sugar industry is dominated by the public sector and all the 15 integrated sugar
mills are managed by the Bangladesh Sugar and Food Industries Corporation (BSFIC). The
cumulative installed capacity of these sugar mills is 7.5 million tons of cane crushing, or 215,000
tons of sugar, annually.

Production of sugarcane in Bangladesh perspectives:

Year

Area (hactors)

Production (tons)

2012

107621

4603003

2011

116175

4671348

2010

117500

4490812

2009

126261

5232649

2008

129473

4983656

Production of sugarcane in Asia perspectives

Country

Production

Percentage

India

347870000

82%

Pakistan

58397000

13%

Iran

6000000

1.5%

Bangladesh

4603003

1%

Nepal

2930047

0.69%

Srilanka

673470

0.16%

Afghanistan

77500

0.018%

Bhutan

14000

0.003%

Production of sugar in Bangladesh:

On an average every year Bangladesh produce 7.3 million metric tons sugarcane from 0.43
million acre area. On the other hand, Country total demand is 10-12 lacs metric tons sugar where
1.5 lac tones produce by the country and rest of the demand total come from abroad by
importing. Without government industry In Bangladesh three private sugar industries also
produce sugar. Among them the total production of Meghan group is assume to be 6 lac metrics
ton. Country total demand is 10-12 lacs metric tons sugar where 1.5 lac tones produce by the
country and rest of the demand total come from abroad by importing. Most of the portion of
importing sugar is come in an invalid way in our country.

A list of sugar Manufacturers Company in Bangladesh

Zeal Bangla Sugar Mills Ltd.

Thakurgaon Sugar Mills Ltd.
Shyampur Sugar Mill Ltd.
Setabgonj Sugar Mills Ltd.
Rangpur Sugar Mills Ltd.
Rajshahi Sugar Mills Ltd.
Panchagar Sugar Mills Ltd.
Pabna Sugar Mill Ltd.

North Bengal Sugar Mills Ltd.

Natore Sugar Mills Ltd.
Mobarakgonj Sugar Mill Ltd.
Kushtia Sugar Mills Ltd.
Jaypurhat Sugar Mills Ltd.
Faridpur Sugar Mills Ltd.
Carew
&
Co
(Bd)

Ltd.

Lists of sugar importing country in Bangladesh:

Moon trading company.

Richi international.
Al-hasan and company.
Panacea international limited.

Problem of sugar production in Bangladesh:

Cultivators fall in continuous loss curve for
Production cost high where low price from manufacturer mills factory.
Insects Attract and lack of proper prevention on time.
Soil erosion in the cultivated field and damage of crops.
Ancient machinery of mills factory.
Importing curve upright
Improper control of the statutory body.
Govt. less compensation to the industry
Recovery Problem
Sales Problem
These problems hamper the production of sugar in Bangladesh. So the production rate is
decreasing day by day and we have to import sugar to meet our daily demand. So, we the general
public and the government should work hand in hand to remove the problem and grows more
sugar.

Recommendations for Sugar Mills Ltd:

The first and foremost recommendation is to increase the price of sugar according to the
production cost.

The recovery of the sugar must have to be increased.

Ensuring quick procurement of the cane and quick payment of price.

Managing training facilities for the farmer to develop their efficiency.

Purchasing sufficient Vehicles to remove the transportation problem.

Purchasing modern machinery and equipment to remove the machinery problems.

Removing production problem by implementing modern technique.

Sufficient credit should be given to the farmers.

Ensuring political stability to produce the normal production.

Eradicating illegal pressure by the labor union and establishing good industrial relation.

Government has to reform import policy to protect the sugar industry.

Reduce intermediates between mills factory and farmers.

Supplying sufficient capital etc.

If the recommendation methods are used properly the problems have to be overcome in some
ways. So, these steps should be taken carefully to increase the production and also inspire the
farmers to grow more sugarcane. So the mills produce more sugar to use the sugarcane.

Number of diabetic patient in Bangladesh:

Total number of diabetic patient in Bangladesh is 84 lac. Health and family ministers
Mohammad Nasim said that in April 2014. Data is given by BBS. (News today 3rd April 2014)
As the number of the diabetic patient is increasing in Bangladesh the uses of sugar is also
decreasing because the patient is not using sugar. As the rate of the sugar uses is decreasing the
production is also decreasing.

Uses of sugarcane:
Extract sugar from the juices to purify into table sugar.
Suck the juices out of section of the cane as a kid treat.
Burn the empty cane as fuel.
Business market operation of sugar:

By following the supply chain model the sugar is transported from the various stages of the
supply chain and finally goes to the consumer from the supplier.

World
Sugar is an important global trading commodity. In countries with a moderate climate, especially
Western, Central and Eastern Europe, as well as the United States, China and Japan, sugar is
produced from sugar beets, whereas in tropical and subtropical areas it is extracted from sugar
cane. The most important sugar producing countries are: Brazil, India, Thailand, China,
Australia, Mexico, Cuba and the United States. In total, sugar is produced in 113 countries
around the world. Seventy-one countries produce sugar from sugar cane, thirty-five only from
sugar beets, and seven from both plants.
Development of total world sugar production in comparison to cane and beet sugar
production

Since the end of the eighties, increases in global sugar production have been mainly attributable
to sugar cane. In contrast, beet sugar production during the same period has remained relatively
steady at about thirty-three million tones. Sugar cane and beet sugar production will reach 138
million tonnes and thirty-eight million tonnes respectively in fiscal 2011/12. Beet sugar accounts
for about twenty-two percent of total production.
World sugar production and consumption
Since the late eighties, the growth of world sugar production are ascribed to the cane sugar. In
contrast, the beet sugar production is moving in the same period, with around 35 million tonnes
at virtually the same level. In the marketing year 2012/13, around 145 million tonnes of cane
sugar and 38 million tonnes of beet sugar produced. The proportion of beet sugar to total
production is around 21%.

Production
More than 130 countries produce
either sugarcane or sugar beet,
and ten of these produce sugar
from both cane and beet crops.2
Sugarcane, on average, accounts
for 75 to 80 percent of global
production per year, and
developing countries produce
about 70 percent of total global
output. Production has become
increasingly concentrated since 1980, when the top ten producing countries accounted for 56
percent of global output compared to 2004, when the top ten accounted for 69 percent.
The largest sugar producing countries in the world consist of both beet and cane sugar producers,
which combined account for more than 70 percent of global output. Brazil, Australia and
Thailand, included amongst the list of the top ten sugar producing countries from sugarcane, are
also considered amongst the lowest cost and efficient of global sugar producers. All three are
also ranked amongst the top ten sugar exporting countries. Sugar output in the United States,
China and Pakistan is derived from both sugar beet and sugarcane crops. Domestic production in
the EU and the Russian Federation is derived from Sugar beet.

World sugar production

- 1 000 t Rw -

2010/11

2011/12

2012/13

EU

15 524

18 604

17 143

Europe

24 656

30 751

28 599

North America

18 857

20 515

22 725

South America

46 214

42 997

50 456

America

65 071

63 512

73 181

Asia

61 406

66 192

65 225

Africa

10 324

10 667

11 414

Oceania

3949

4217

4658

Overall

165 406

175 339

183 077

Rw = raw

Consumption
Developing countries account for 67 percent of global sugar consumption, and are expected to be
the primary sources of future demand growth, particularly in Asia. Global consumption
continues to expand, averaging between 1.5 to 2 percent, driven largely by rising incomes,
population growth and shifting dietary patterns.
The top ten sugar consuming countries account for 64 percent of global sugar consumption,
largely based on population balance, particularly in the case of the EU, and the United States,
where sugar demand is largely saturated and mostly keeping pace with population growth rates.
Sugar consumption is only one part of total sweetener consumption in the case of the United
States, where more high-fructose (corn-based) sweetener is consumed annually per capita than
sugar. Globally, sugar consumption has continued to grow over the past decade, from 20.7 to
23.2 kgs, driven primarily by higher population and income growth in developing countries,
particularly those in the Far East.

World sugar consumption

- 1 000 t Rw -

2010/11

2011/12

2012/13

EU

18 709

18 831

18 929

Europe

30 710

31 076

31 131

North America

19 585

19 741

20 273

South America

20 575

21 018

21 198

America

40 160

40 760

41 471

Asia

71 794

74 914

76 751

Africa

16 356

17 086

17 635

Oceania

1703

1703

1707

Overall

160 723

165 538

168 695

Rw = raw

Top 10 Largest Sugar Cane Producers in the World were as follows

Rank

Country

1.

Brazil

Production
(Tonnes)
672,157,000

2.

India

285,029,000

3.

China

116,251,272

4.

Thailand

66,816,400

5.

Pakistan

50,045,400

6.

Mexico

49,492,700

7.

Colombia

38,500,000

8.

Philippines

32,500,000

9.

Australia

30,284,000

10.

Argentina

29,000,000

Brazil is the worlds Biggest Sugarcane producing country in all over the nations with a total
production of 672,157,000 tonnes. While India is the 2nd biggest producer after Brazil.

International Sugar Exporters

The international export market is dominated by Brazil. This concentration is set to increase
over the next decade, giving Brazilian producers greater power to influence prices. Even
countries which can produce sugar relatively cheaply face being undercut by Brazil, since its
producers can turn large volumes onto the world market at any one time.

International Trade
International trade is largely defined by preferential trade agreements in which sugar producing
countries enjoy access to the higher priced domestic markets of the EU or USA through
preferential access. Trade under preferential agreements is very important to the sugar sectors of
many developing countries. Sugar trade between African Caribbean and Pacific countries (ACP)
and the European Union, for example, is regulated by two agreements: the ACP/EU Sugar
Protocol and the Agreement on Special Preferential Sugar (SPS). Other significant trade
agreements in international sugar markets include everything but Arms (EBA) initiative,
Caribbean Basin Initiative (CBI), African Growth and Opportunity Act (USA), North American
Free Trade Agreement (NAFTA), and the Southern Africa Customs Union (SACU). FAO studies
have found that EU sugar policy reform implies an erosion of preferences for the ACP countries
that export to the EU under the Sugar Protocol, with potential gains for LDCs due to the
implementation of the EBA initiative, primarily over the medium to longer term.
Key characteristics of the international sugar market
Cane sugar is the primary source of internationally traded sugar, as sugar beets are grown and
processed almost exclusively for internal domestic markets, and the most efficient sugar beet
processing technologies result in one-step production for refined (white food grade standard)
sugar. Sugarcane is harvested and milled into raw sugar (non-food grade) to further refine at
some later date or immediately refined into white (food grade) sugar. Specifications for sugar
purchases will vary according to the specific applications of the end users, with trade volumes
and prices broadly categorized as raw or refined types of sugar. Sugar polarity, or degree of
refining purity, is a measurement of the degree of purity of the sugar (based on molasses
content), how close the color of the sugar is to pure white and dextran content. Dextran is the
fibrous content of the sugar that develops when sugarcane is cut during harvest, which tends to
make refining the cane more difficult. Polarization is what distinguishes raw from refined sugar,
with polarity at 100 percent signifying pure refined sugar. Raw sugar trades according to various
polarity specifications, based upon the specific needs of refining and processing facilities as well
as refinery sugar production costs. There are four general sugar product types trade in
international markets based on polarity: refined (white) sugar; semi-refined or direct white (also
called plantation white); very-high polarity raw sugar (VHP); and standard raw sugar. Polarity is
also a key determinant of raw and refined sugar pricing.

Global Sugar Trade

According to ISO data, world sugar trade averages some 46 million metric tons per year, with
nearly 90 percent based on ocean or seaborne trade. Raw sugar accounts for more than 50
percent of internationally trade volumes. Nearly 12 million tons of global raw sugar trade is
conducted under preferential agreements. Although many countries produce sugar, ten countries
dominate global raw sugar exports, with Brazil, Australia, Thailand, Cuba, Guatemala, South
Africa, Mauritius, Colombia, El Salvador and Fiji, accounting for nearly 90 percent of global
export trade. Brazil, as the largest producing and exporting country in the world, dominates
world trade, accounting for 51 percent of global export trade in 2005, up from 21 percent in 2000
and evidence of the significant expansion of the sugar-ethanol complex in Brazil over the past 10
years. The Russian Federation, EU-25, United States, South Korea and Japan are the worlds
largest importing nations, although India also emerged as an important importer of raw sugar in
2004 and 2005.
Global trade in refined sugar
The top ten exporters of refined sugar account for nearly 80 percent of global refined trade. The
EU, Brazil and Thailand account for a major proportion of global trade, with sporadic entry with
high volumes into the global refined market by India. As the largest white sugar exporter until
2006, the EU consistently exported to the Middle East and West Africa. Although the EU has
been the major exporter of high quality refined sugar in past years, Brazil has steadily gained
market share through exports of a lower quality white sugar. Large destination refineries in the
Persian Gulf are increasingly important as domestic and regional suppliers of refine sugar.
Destination refineries usually import high quality raw sugar (VHP) which helps defray refining
costs. Globally, refined sugar import volumes are much less concentrated amongst the top ten
importing countries than in raw sugar trade. The role of quality in sugar trade Trade in raw sugar
is typically differentiated polarity and color, based on ICUMSA ratings.13 Refineries pay
premiums for raw sugar with polarity over 96 degrees.14 The higher the polarity, the less
additional refining throughput is necessary, lowering overall refining costs. Payments of
premiums above or below the notice price against the New York Number 11 raw sugar contract
are determined through polarization samples upon delivery. A standard discount of 5.5 percent is
charged against the contract price when the sampled raw sugar is between 95 to 96 polarities.
Premiums are paid polarity above the contract standard of 96 percent, ranging from 1.5 percent
for 96 to 97 polarity to 3.79 percent for 99.3 percent polarity.
Origin and quality typically differentiate refined sugar trade. The European Union was a
consistent exporter of four to six million tons of high quality refined sugar to the world market,
irrespective of world market prices for 25 years, due to EU subsidies of surplus domestic sugar.
The export subsidies essentially shielded EU exporters from the need to capture sufficient
refining margins in world prices received for their refined sugar, and ensured that the EU would
become the primary supplier for nearly 60 percent averaging four to six million tons - of total
world trade in refined sugar. The WTO ruling against EU sugar export subsidies restricts total
EU exports to an annual limit of 1.3 million tons from 2006/2007, and represents a serious
structural shift in global refined markets.

Brazil emerged as a major refined sugar exporter in the mid-1990s, introducing very high pol
(VHP) that ranged (in terms of sucrose content, color and purity) between raw and refined sugar.
VHP sugar must have a minimum 99.4 percent polarity. Brazilian cane refiners are generally
able to produce a very high polarity, almost semi-refined, sugar very economically and
efficiently, primarily due to co-production of ethanol and sugar. Brazil VHP sugar currently
dominates world trade in raw sugar and has become benchmark for high quality raw sugar trade.
SUGAR INDUSTRY
Sugar Industry dates back to the very founding of the New World, and has been intricately
entangled with its history. Because of its role in the slave trade, sugar played an important role
not only in the economy but also in how social relations developed in the New World. In the
infamous "triangle trade," English colonies in the Caribbean shipped sugar to England for
refining, and the products went to Africa where traders exchanged them for slaves, who were
brought to the Caribbean plantations to raise more sugar. Sugar plantation work was among the
most brutal and dangerous, as workers labored in oppressive heat and swampy conditions, and
with dangerous tools.
MODERN SUGAR MARKET
Despite the end of European colonial rule, many of the tariff agreements continue to follow the
trade patterns established in colonial times. With the emergence of the European Union (EU) as
an economic union in the closing years of the twentieth century, agricultural policy coalesced
into the Common Agricultural Policy (CAP) of Europe. The CAP established a system of tariffs
to protect domestic producers from foreign competition. Historically, African, Caribbean, and
Pacific (ACP) sugar producers were given access to the European market under the CAP through
the Sugar Protocol of the Lom Convention and its successor the Cotonou Agreement.
At the beginning of the twenty-first century, most countries that support their internal sugar price
use a form of the tariff rate quota (TRQ) which is allowed under the Uruguay Round Agreement
on Agriculture. The TRQ is a system of two tariffs. The first tariff allows the sale of a fixed
quantity (or minimum access) of a commodity at a lower or first tier tariff. Any quantity of that
commodity imported above this fixed quantity is charged a higher (typically prohibitive) tariff.
Given that the second tariff level is prohibitive, the country can increase the price received by
domestic producers by reducing the fixed quantity imported under the first tier tariff. This is the
policy instrument used by both the United States and the EU to increase the price of sugar for
their respective producers. However, apart from supporting domestic producers, the TRQ gives
countries in the EU a mechanism to honor its commitments to the ACP. Specifically, former
colonies can be allocated portions of the minimum access quantity, in essence giving ACP
countries access to a higher internal price of sugar at a low tariff rate. The United States allocates
its first-stage quota in a similar way to a group of forty countries.
Apart from its grounding in historical trade patterns, the international sugar market is also
affected by a myriad of regional and global trade agreements. Regional trade agreements involve
a small number of countries in the same geographic region. In this context, the agreements
forming the EU are a regional trade agreement. Other regional trade agreements include the
North American Free Trade Agreement (NAFTA) and proposed trade agreements such as the
Free Trade Area of the Americas (FTAA). The effect of each of these trade agreements on sugar
markets is dependent on the role sugar plays in each group of economies.

Conclusion
Bangladesh is pretty much behind in the sugar business compare to the global competition.
Bangladesh produces average quality of sugar and being an importer country in global sugar
business, it will take a lot of effort to be a well-known exporter in sugar business. Addressing the
above figures the tragic fact is that in farther ahead Bangladesh will have no bright future in the
international sugar marker. The global sugar market is complex and experiencing fundamental
shifts in terms of the recent focus on sugar as a feedstock for ethanol, the loss of the EU as the
major refined sugar supplier and loss of preferences by many traditional ACP sugar exporters
due to EU sugar reform. At the national level, the range of sugar products and qualities is much
more extensive than the product quality traded internationally, particularly for large industrial
users and food processors. Sugar should continue to play a key role in the development of the
agricultural sectors of sugar-producing LDCs, many of which have attracted capital investment
in either the expansion of current farm gate production, refining capacity or green fielding
sugarcane refineries. Rapid growth is already underway as some of the most efficient sugarproducing LDCs start to expand production and processing facilities to capitalize on duty-free
access.

References:
Encyclopedia
en.wikipedia.org
Suedzucker