Sugar in Chile - By Peter Buzzanell

     Chile’s beet sugar production has averaged 323,000 metric tons, raw value, over the past decade, and the sector continues to be among the world’s lowest-cost beet sugar producers.  Growth in sugar consumption has led to substantial annual imports of refined sugar, with the bulk of these imports coming from other Latin American countries, particularly Argentina.

Production

    Most Chilean sugarbeet production is concentrated in Linares Province in the southeast part of the Maute Region in central Chile south of Santiago.  Linares has a favorable climate and good natural irrigation.  Good growing conditions reflect a mild Mediterranean climate with hot, dry summers (November-March) and humid and rainy winters (May-September).  Unusually cold and rainy spring weather can delay planting, and excessive heat in the summer can reduce yields.
    Planted sugarbeet area has averaged between 50,000 to 55,000 hectares (124,000 to 136,000 acres) annually over the past decade.  Area and production shift marginally year to year, reflecting profitability of substitute crops compared with sugarbeets.  Adverse weather conditions negatively influence yields, though irrigation can offset excessively dry conditions.  Beet sugar production has averaged 323,000 metric tons during the past five years, with 370,000 tons forecast for the 2011 campaign, which runs from April to August.
    Chile is among the world’s lowest-cost (field and factory) beet sugar producers, according to LMC International.  While this South American nation has slipped from ranking as the number-one low-cost producer, LMC International still ranks it among the lowest five producers out of a survey of 36 beet sugar-producing-nations.  The low costs are due primarily to impressive yields because of the aid of irrigation in most of Chile’s sugarbeet growing areas.  Also, the mild climate permits fresh beets to be harvested over a long period.  This climate also allows beet processing factories to operate for more than 150 days per year.
    The sole sugar company in Chile is IANSA, S.A.  It both produces sugar from sugarbeets and imports refined sugar.  IANSA finances the cultivation of sugarbeets, as well as farm labor and harvesting and the production of beets on long-term rented land.  It operates five beet sugar factories with a combined daily slicing capacity of 24,100 (metric) tons. The factories (and their daily beet slicing capacity, listed in metric tons) are as follows:
    • Curico Iansagro — 5,800 MT
    • Linares Iansagro — 5,800 MT
    • Losangeles Iansagro — 3,400 MT
    • Nuble Iansagro — 6,000 MT
    • Rapaco Iansagro — 3,100 MT
    The Chilean government provides support to its sugar sector via a price band system.  Price band levels are announced prior to the planting season in order to provide producers with information on the level of support they can anticipate.  The goal is to promote domestic sugarbeet production and processing and simultaneously discourage excessive sugar imports.  The price band works as follows: 
    • The minimum import price is typically set above both the world and Chilean price. 
    • When world prices are below the floor of the price band, a surcharge is applied on all sugar imports.  This surcharge is based on the lowest quoted fob price necessary to bring cif/Santiago prices up to the price band floor.
    • Reductions from the normal 7% import duty apply when world prices exceed the ceiling of the band. 

Consumption & Imports

    Chile has a population of about 16.6 million with an annual growth rate of 0.9%.  Retail use of sugar continues to expand gradually, reflecting population growth.  Sugar consumption has increased by 200,000 tons over the past decade and is forecast at a record 780,000 metric tons in 2011. 
    Domestic use is being spurred by strong industrial utilization by bakery, confectionery and canned fruit products.  Sugar-containing product exports are also fostering increasing use, led by confectionary products.
    The gap between consumption and production is growing, leading to more imports.
    Chile is a major importer of refined sugar, with annual imports of between 400,000 and 600,000 metric tons. However, periods of excessive domestic stocks caused by a weakening in the economy can periodically lead to a sharp reduction in imports.
    Most of Chile’s refined sugar imports come from other Latin American countries — mainly Argentina, Guatemala and Colombia.  Argentina was the leading supplier in 2006 and 2007, but Guatemala held that designation in 2008 and 2009.
    As noted, the Chilean sugar import regime is regulated by the price band system designed to protect domestic producers from excessive world market competition.  Recently, values have been a price ceiling of $319 per ton (14.5 cents/lb.) and a price floor of $292 per ton (13.2 cents/lb.). 
    According to the CEO of IANSA, the company is currently investing heavily in technological improvements.  A US $50 million investment plan is underway, focusing on technology, mechanization and research to help lift yields, improve profits and ensure that imports are not excessive.
    This investment, along with its natural resource attributes, is likely to keep Chile as one of the world’s lowest-cost beet sugar producers.     

By Peter Buzzanell