In late 2015 prices in China, the world’s largest sugar importer, rose well beyond world prices. Traders now estimate that around 100 trucks a day carry the sweetener across the Myanmar-China border. China’s growing need for sugar imports is driven by falling domestic sugar production, after fields were given over to crops that were previously more competitive.
Rice, bean and maize traders in Myanmar, inspired by the booming trade, started dealing in sugar at the end of last year when prices in China reached more than US$800 per tonne.
This week the price of white sugar in India was $440 per tonne, the re-export price at Muse on Myanmar’s border with China was 4140 yuan ($637.5) per tonne and the price in landlocked Kunming, the capital of Yunnan province was 5400 yuan ($831.5) per tonne, said U Sein Tun of the Sugar Cane and Sugar-Related Products Merchants and Manufacturers Association.
Sugar is mostly imported from India and taken through Myanmar to the Chinese border with permission from the Ministry of Commerce. From there it is typically smuggled across the border, as China does not formally allow sugar imports from Myanmar, though often turns a blind eye.
Last November and December, the trading season, the industry boomed. Global sugar prices were high and the exchange rate favoured exports.
But over the past few months the kyat has strengthened and China has tightened controls on sugar imports, meaning some traders have faced losses, said industry insider Ko Nyein Chan Htwe.
U Sein Tun said that within three months, from January to March, 1.15 million tonnes of sugar was imported from India to Myanmar, but not all of this was re-exported to China. Daily sugar flow from India into Myanmar has been around 8000 to 9000 tonnes, he said, of which around 4000 tonnes is re-exported daily to China.
Excess sugar in Myanmar will push prices lower, he said. A stronger kyat is also starting to hurt traders who have stored large quantities of the sweetener. The kyat has strengthened by almost 12 percent against the US dollar this year to K1168.
“Consumers will be happy with the excess supply, but traders may have to take care over storage,” said Ko Nyein Chan Htwe of Shwe Nay Aung Chan Win trading company which distributes sugar. “Their problems are mostly not related to seizures of sugar at the Myanmar-China border in Muse or too much sugar from India but to changes in the exchange rate.”
He said the country’s sugar traders must balance supply and demand, or may have to sell their stock at a loss.
“It would be much better if China allowed a quota for Myanmar re-exported sugar through a government-to-government agreement. I am not sure why China opens and closes its borders to trade. Maybe it is to do with politics, or demand,” he said.
For now, traders are still trying their luck. In the past the market was controlled by a handful of export-import companies, but since the November 2015 election, it has become easier to obtain licences, said Ko Nyi Lay, adding that rice, bean and maize traders have switched to the sugar industry. Others say the permit system still favours well-connected companies.
“Re-exporting sugar is good business for traders, but the permit system is unfair,” said U Win Htay, deputy chair of the Sugar Cane and Sugar-Related Products Merchants and Manufacturers Association.
“Some companies have permission to export 50,000 to 100,000 tonnes of sugar, while ordinary traders can only get permits to export 2000 tonnes,” he said.
Low supply in the cane season later this year is likely to keep prices high, traders said. Sugar imports from Thailand to Myanmar are likely to fall by 30 percent, as yields drop due to drought and high temperatures brought on by one of the strongest El Niño weather patterns in more than six decades. Indian sugar production is also likely to be lower this year due to the weather pattern, they said.
Sugar in Thailand costs more than Indian sugar but is also of better quality, said Ko Nyi Lay, a trader based on Tamu on the Myanmar-India border.
Normal sugar trade across the Myawaddy border with Thailand has been disrupted due to higher prices, he said, and traders are starting to store Thai sugar until supply drops and demand rises.