EXTRA SWEET

Azerbaijan is one of the few countries that is completely self-sufficient in granulated sugar and has good prospects for boosting exports of this product. Azerbaijan attained this result back in 2007, i.e. a year after the biggest sugar refinery in the Southern Caucasus was commission in the Imisli District. In one of his speeches, President Ilham Aliyev noted that Azerbaijan had become 174 per cent self-sufficient in sugar and sugar-based products, referring to this field as the country's most promising export opportunity.

There are many factors favouring the boosting of the sugar industry's export potential. The most important of them is the favourable price of this strategic product on world markets. Sugar prices have risen considerably since 2009 owing to the economic crisis and drought, with a similar tendency observed at the beginning of 2014. According to the estimates of the FAO (Food and Agriculture Organisation of the United Nations), the average value of the sugar  price index in March was 253.9 points, 18.5 points (7.9 per cent) higher than the figure for February. The growth in prices has been caused by fears of a reduction in the volumes of sugar exports available from Brazil and Thailand owing to drought and a concomitant drop in production.

The long-term forecasts for sugar prices also look extremely optimistic. On the one hand, this is linked to a stable growth in world consumption of an average of 1.5-2 per cent per year, primarily as a result of the growing incomes of the population, the positive demographic situation and the change in the amounts of sugar being eaten. On the other hand, with oil prices being sufficiently high, the production of bio-fuel is becoming profitable in many countries, even when it is not subsidised. In this connection, the use of agricultural produce as a raw material for bio-fuel is continuing to grow apace. According to the estimates of the Organisation of Economic Co-operation and Development (OECD), by 2020 30 per cent of the sugar cane or 20 per cent of the raw material for sugar production throughout the world will be used to produce bio-fuel. This will naturally have an impact on the rising prices of sugar. It should thereby be noted that a drop in the volumes produced is being observed even now. In the Brazilian Centre South region, which accounts for 90 per cent of the country's total sugar production, output has been falling year on year. We will remind you that Brazil is a world leader in this segment and is responsible for a quarter of the world's entire sugar production and half the world's exports of this product.

Another factor in favour of boosting sugar exports is Azerbaijan's geographical location far away from the major exporters and importers of sugar (Brazil, Thailand, Australia and India), while such major consumers such as China and Russia are on the contrary relatively close to us. Sugar industry expert Nariman Agayev notes that, if the right approach is adopted, Azerbaijan's sugar may take over the markets of Russia, Central Asia and China.

Azerbaijan has moreover already achieved considerable success in exporting sugar. Thus, in 2013, sugar and confectionary worth 243,840,000 dollars were exported, which is 2,660 times more than in 2005. At the present time, sugar produced in Azerbaijan is exported to Turkmenistan, Afghanistan, Georgia, Ukraine, Iraq and elsewhere.

"But we cannot stop at that," says Nariman Agayev. "The entire process, starting from the production of the raw material and finishing with the final end product should be carried out in Azerbaijan. This is what the construction of the sugar refinery at Imisli is scheduled to accomplish."

At the present time, the weak link in the entire production chain is providing the sugar industry with raw material from internal resources. Depending on the geographical location of countries and their climatic conditions, sugar cane, sugar beet, sugar maple tree and sugar palm are used as the raw materials in sugar production. In the conditions in Azerbaijan, sugar beet is grown, the output of which has risen 5.13-fold in 2005-2013. The main problem is that even in 2011, when there was a record sugar beet harvest, 89.2 per cent of the raw materials for the sugar industry still had to be imported.

"Sugar beet production is a rather complicated process. This culture requires a lot of moisture during the development of the taproot, followed by warm, dry weather to allow the sucrose to build up in the taproot. It likes, heavy, well-worked and fertilised soil. In this connection, the entrepreneur should not be blamed for making his job easier by importing the raw material," N. Agayev thinks. In the expert's opinion, it is more advantageous for the entrepreneur to import the raw material, but from the point of view of the country as a whole, there is naturally a need to promote the cultivation of sugar beet. This would create more jobs in the agricultural sector, and at the same time this is a sufficiently valuable agricultural culture, almost 100 per cent of which can be used for various purposes in the food and other industries. Thus, after the sugar has been extracted from the beet, yeast for use in the bread industry is obtained from it. The remainder of the beet is used to make ethyl alcohol. What is left of the sugar beet is added to cattle feed. 

It would however be na?ve to expect sugar beet production in Azerbaijan to increase on its own, the expert believes. "The entrepreneur is interested in reducing production costs to a minimum. The farmers themselves may consider this crop to be less profitable and set their sights on other areas of agriculture."

In this connection, N. Agayev believes that it is expedient to offer subsidies to sugar beet producers. It is noteworthy that the practice of granting subsidies to farmers is nothing new in Azerbaijan. In particular, at the present time wheat and unhulled rice seed producers are receiving a state subsidy of 40 manats per hectare of land planted with these crops. Something like this could be offered to farmers interested in cultivating sugar beet.

According to the data for 2013, the area sown to sugar beet was only 5,500 ha at that time, while the subsidies granted to sugar beet producers were only 220, 000 manats. Even if the area planted with sugar beet were to increase tenfold, the subsidy would not burden the treasury with huge expenditure.  

Sugar beet producers would not need permanent state subsidies either. The expert thinks that five years would be sufficient for them to establish themselves. "The main element in this process is that the producer should be interested in it. In this connection, a joint-stock company could be formed, in which each sugar beet producer could have shares. It would have to regulate the marketing of the products obtained from sugar beet, the refinery and even the production of the yeast, ethyl alcohol and cattle feed. If a joint-stock company were set up, after a few years, the subsidies could be discontinued," N. Agayev concluded.

We can see that all the opportunities are there for the development of sugar production in Azerbaijan. The existing conditions will allow the sugar industry to become one of the main trends in expanding the country's non-oil exports. It is sufficient to note that in 2013, sugar and sugar-based products made up 13 per cent of non-oil exports.