Chile Struggles to Secure Sugar Amid Logistical Chaos

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Czapp Opinion Focus
Chilean sugar demand is recovering as COVID restrictions ease, and more people are vaccinated. However, it’s struggling to import sugar, thanks to a wide array of logistical issues. Its domestic prices have jumped to a five-year high in response.

Chilean Sugar Demand Recovers Whilst Production Dips
• Chilean sugar demand is recovering as COVID restrictions ease, and its vaccination effort continues.
• However, its production has been declining since 2011/12, when two of its three beet factories were forced to close when running costs became too expensive.
• Its production should only decrease further as the Government strives to be Carbon Neutral by 2050.
Chilean Sugar Production is Declining
• We currently think the country will have 488k tonnes less sugar than it needs to satisfy domestic demand in 2021/22.
• This is not unusual; Chile often has around 520k tonnes less sugar than it needs to satisfy demand each season.
• However, this season, it’s struggling to import sugar to fill the void.

Truck Drivers’ Strikes Limit Sugar Imports
• Chile imports around 130k tonnes of sugar from Argentina each year.
• With most of Chile’s demand centred around urbanised Santiago, it’s cheaper to move Argentinian sugar by truck than it is to produce sugar in-country.
• However, this is not an option at present as there haven’t been many truck drivers in Argentina or Chile this year.
• Drivers in both countries went on strike earlier this year, unhappy with their working conditions through COVID.
Truck Drivers’ Strikes Argentina
• With gasoline prices rallying as well, the drivers are asking for more money and freight costs have climbed further as demand intensifies.
• For context, there has been between 10,000 and 20,000 fewer trucks drivers in Chile alone this year.

Maritime Logistics Are Also Causing Problems
• It’s worth noting that Argentina is not Chile’s sole option.
• Chile imports around 370k tonnes from Colombia and Peru each season.
• However, Colombia’s sugar exports to Chile are already down 94k tonnes year-on-year (30%).
Colombia’s Sugar Exports to Chile
• Peruvian exports to Chile are also down.
• In both cases, imports are down, not only due to high freight costs, but because workforces at ports have reduced through COVID, leading to vessel delays, blank sailings, and export caps.
• The present lack of containers also means sugar is being stored in warehouses whilst suppliers try to secure vessels.

Domestic Prices Rise as Supply Tightens
• Chile’s sugar prices are approaching five-year highs as the country struggles to secure supply.
• It’s not just sugar being affected, though.
• Prices for 43 of the 76 food products Chile imports have increased.
• The price of all products combined has increased by 4.5% in 2021, which means they are the highestthey’ve been since March 2016.
• It’s not yet clear when prices will ease, but we fear today’s inflation could prolong the situation.
• If this is the case, Chile’s demand for sugar and other food products could reduce.

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