According to the USDA’s semi-annual report on the sugar sector in the Dominican Republic (DR), some 553,000 tonnes of sugar was produced in marketing year (MY) 2011/12, with production of 555,000 tonnes expected in 2012/13. This consolidates the increase in production since 2010/11 (when 510,000 tonnes was produced). For MY 2011/12, production was made up of 378,497 tonnes of raw sugar and 174,923 tonnes of refined sugar. Refined sugar production entirely met domestic sugar demand. In addition to sugar, the DR’s sugar sector produces molasses and furfural (an organic compound), with exports valued at US$9 million (for molasses) and US$15 million (furfural). Sugar is also used in the export-processing zone (EPZ) for the production of sweetened coconut milk and piña colada mix, juices and canned beans and peas, with the companies in the zone permitted to import and re-export some 6,000 tonnes of sugar for this purpose. Development of ethanol and bio-energy production is apparently held back by an uncertain regulatory framework.
Despite government regulation of the relationships along the sugar supply chain (including the price of sugar cane), according to the USDA ‘sugar cane prices have been rather volatile due to a shortage in domestic sugar and increase in international prices.’
Exports, meanwhile, are projected to rise from 209,000 tonnes in calendar year 2012 to 212,000 tonnes (2013), continuing the incremental growth since 2011 (206,514 tonnes). The DR has been exporting sugar to Haiti since January 2010. However, the main market for the DR’s sugar exports is the US, where it has a tariff-rate quota (TRQ), which it consistently fills. The DR has the largest US sugar quota allocation. In fiscal year 2012, the DR allocation was 209,732 tonnes raw value, some 17% of the entire US TRQ. However, the overall size of the US TRQ varies from year to year. For 2013, the US TRQ allocated to the DR has been reduced to 188,908 tonnes raw value, some 10% below the 2012 level. Given this smaller US quota allocation, while no exports of sugar from the DR to the EU took place in 2012, there is ‘the possibility that the DR might be able to export some sugar to the European Union during the MY 2013’. However, exports to the EU will only take place after the US quota has been fulfilled, with this in part depending on the price differential between the US and EU markets, which varied considerably from May to December 2012.
The DR’s imports of sugar are influenced by its WTO commitments, and regulated by an import permit system, for quantities ranging between 20,000 and 49,000 tonnes. Import permits are issued on a ‘first come, first served basis’ within the ceiling of 48,700 tonnes. The DR has an expanding WTO sugar import TRQ (rising from 23,000 tonnes to 32,000 tonnes) on which duties of 10% for raw sugar and 20% for refined sugar are charged. An out-of-quota tariff of 85% is charged. Under the CAFTA-DR agreement, the government is committed to phasing out its sugar tariffs over a 15-year period.
Comparison of EU, US and world market sugar import prices (US cents /lb)
World market: http://www.indexmundi.com/commodities/?commodity=sugar
The largest DR sugar quota allocation for the US market goes to the DR’s Central Romana mill, which is owned by American Sugar Refining (ASR). However, following the takeover of Tate & Lyle Sugars by ASR, 2013 may well see renewed exports of sugar from the DR to the EU, particularly given the reduced US TRQ allocation for 2013. This will be helped by the convergence of EU and US prices: according to the Indexmundi commodities website, average European monthly import prices exceeded average US prices between September and December 2012, with the gap growing. However, the average monthly prices are merely indicative, with individual contract prices varying considerably. In addition, any exports to the EU are likely to take place between sister companies, which creates a situation where it is unlikely that high spot-market prices would be paid. This suggests a need for greater monitoring of actual prices received by ACP sugar exporters by the regulatory authorities in the countries concerned, in order to determine the best vehicle for maximising net income from sugar export sales.