Required Report - public distribution

**Date:** 10/31/2006

**GAIN Report Number:** TU6047

TU6047

**Turkey**

**Sugar**

**Semi Annual**

**2006**

**Approved by:**

![](media/image1.wmf)Ralph Gifford, Agricultural Counselor

Ankara

**Prepared by:**

Unal Sarigedik, Agricultural Specialist

**Report Highlights:**

Sugar beet and centrifugal sugar production in MY 2007 is expected to be
lower than the quota target announced earlier. The estimate is lower
because of reduced yields due to hot and dry weather in summer. Sugar
beet production is now estimated at 14.2 MMT and centrifugal sugar
production at 2,065,000 MT (Raw value). Industry sources do not expect
an increase in the quota for cornstarch-based sweetener (SBS) producers
in MY 2007 due to a court decision that was produced by PANKOBIRLIK.
Cumra refinery has been setting up plant to produce ethanol from sugar
beets. It is projected that ethanol production will start in MY 2007.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Semi-Annual Report

Ankara \[TU1\]

\[TU\]

Table of Contents

[Production 3](#production)

[Sugar Beets 3](#sugar-beets)

[PS&D for Sugar Beets 3](#psd-for-sugar-beets)

[Centrifugal Sugar 3](#centrifugal-sugar)

[PS&D for Centrifugal Sugar 3](#psd-for-centrifugal-sugar)

[Cornstarch-Based Sweeteners 3](#cornstarch-based-sweeteners)

[Ethanol and Molasses 3](#ethanol-and-molasses)

[Consumption 3](#consumption)

[Prices 3](#prices)

[Trade 3](#trade)

[Export Trade Matrix for Centrifugal Sugar
3](#export-trade-matrix-for-centrifugal-sugar)

[Import Trade Matrix for Centrifugal Sugar
3](#import-trade-matrix-for-centrifugal-sugar)

[Stocks 3](#stocks)

# Production

## Sugar Beets

The MY 2007 sugar beet crop is expected to be slightly lower than the
quota target announced early in the season prior to planting, as a
result of lower yield due to very hot and dry weather in summer. Post
now estimates sugar beet production at about 14.2 MMT compared to 14.7
MMT estimated earlier. Out of this total, the Turkish Sugar Corporation
(TSC) is estimated to produce around 6.5 MMT and all others, including
PANKOBIRLIK producers, are estimated to produce a total of about 7.7
MMT. TSC announced the procurement price as YTL 89.9 per MT of beets
(based on 16 percent polar sugar content). A year ago the procurement
price was higher at YTL 98.909 per MT. Fiscal austerity requirements
imposed by the IMF limit the quantity of sugar procured at the full
price.

Total area of sugar beet is still estimated at 330,000 hectares. Nearly
one half of this total is the area for TSC farmers, estimated at 160,000
hectares. The average sugar beet yield is estimated around 43 MT per
hectare compared to 45 MT per hectare a year ago. The yields are
slightly lower for the TSC refineries, but slightly higher for other
refineries. Similarly, polar sugar content, which is estimated similar
to the previous year on the average, is estimated lower for the TSC
refineries than other refineries.

### PS&D for Sugar Beets

## 

<table>
<colgroup>
<col style="width: 11%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 9%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="11"><p>Turkey</p>
<p>Sugar Beets</p></td>
</tr>
<tr class="even">
<td></td>
<td><strong>2005</strong></td>
<td><strong>Revised</strong></td>
<td></td>
<td><strong>2006</strong></td>
<td><strong>Estimate</strong></td>
<td></td>
<td><strong>2007</strong></td>
<td><strong>Forecast</strong></td>
<td></td>
<td><strong>UOM</strong></td>
</tr>
<tr class="odd">
<td></td>
<td><strong>USDA<br />
Official</strong></td>
<td><strong>Post<br />
Estimate</strong></td>
<td><strong>Post<br />
Estimate<br />
New</strong></td>
<td><strong>USDA<br />
Official</strong></td>
<td><strong>Post<br />
Estimate</strong></td>
<td><strong>Post<br />
Estimate<br />
New</strong></td>
<td><strong>USDA<br />
Official</strong></td>
<td><strong>Post<br />
Estimate</strong></td>
<td><strong>Post<br />
Estimate<br />
New</strong></td>
<td></td>
</tr>
<tr class="even">
<td><strong>Market Year Begin</strong></td>
<td></td>
<td>09/2004</td>
<td>09/2004</td>
<td></td>
<td>09/2005</td>
<td>09/2005</td>
<td></td>
<td>09/2006</td>
<td>09/2006</td>
<td>MM/YYYY</td>
</tr>
<tr class="odd">
<td><strong>Area Planted</strong></td>
<td>330</td>
<td>330</td>
<td>330</td>
<td>330</td>
<td>320</td>
<td>336</td>
<td>330</td>
<td>0</td>
<td>330</td>
<td>1000 HA</td>
</tr>
<tr class="even">
<td><strong>Area Harvested</strong></td>
<td>329</td>
<td>329</td>
<td>329</td>
<td>327</td>
<td>320</td>
<td>335</td>
<td>330</td>
<td>0</td>
<td>330</td>
<td>1000 HA</td>
</tr>
<tr class="odd">
<td><strong>Production</strong></td>
<td>13800</td>
<td>13800</td>
<td>13800</td>
<td>14700</td>
<td>14500</td>
<td>14700</td>
<td>14700</td>
<td>0</td>
<td>14200</td>
<td>1000 MT</td>
</tr>
<tr class="even">
<td><strong>Total Supply</strong></td>
<td>13800</td>
<td>13800</td>
<td>13800</td>
<td>14700</td>
<td>14500</td>
<td>14700</td>
<td>14700</td>
<td>0</td>
<td>14200</td>
<td>1000 MT</td>
</tr>
<tr class="odd">
<td><strong>Utilization for Sugar</strong></td>
<td>13800</td>
<td>13800</td>
<td>13800</td>
<td>14700</td>
<td>14500</td>
<td>14700</td>
<td>14700</td>
<td>0</td>
<td>13800</td>
<td>1000 MT</td>
</tr>
<tr class="even">
<td><strong>Utilization for Alcohol</strong></td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>400</td>
<td>1000 MT</td>
</tr>
<tr class="odd">
<td><strong>Total Distribution</strong></td>
<td>13800</td>
<td>13800</td>
<td>13800</td>
<td>14700</td>
<td>14500</td>
<td>14700</td>
<td>14700</td>
<td>0</td>
<td>14200</td>
<td>1000 MT</td>
</tr>
</tbody>
</table>

## Centrifugal Sugar 

There are a total of 33 sugar refineries in Turkey. Out of this total,
22 factories are owned and run by the Turkish Sugar Corporation (TSC),
five are owned by PANKOBIRLIK (those in Amasya, Kayseri, Konya, Cumra,
and Bogazliyan), three are owned by the private sector (in Adapazari,
Kutahya, and Aksaray), and three (in Ilgin, Bor, Eregli) were
transferred to the Privatization Administration, but have not yet been
privatized. The Adapazari and Aksaray refineries began production in MY
2007. the Bogazliyan plant is also expected to start production by the
end of October 2006.

Total quota distributed for sugar producers was 2.2 MMT (raw value). Of
this total about 985,000 were given to TSC, about 900,000 MT were to
PANKOBIRLIK and private sector refineries, and about 315,000 MT were to
those three refineries that are announced to be privatized (all of these
figures are on refined basis). TSC's quota originally was about
1,160,000 MT, but TSC requested a reduction because of its carry over
stocks.

Total sugar production for MY 2007 is estimated at 2,065,000 MT at this
point. This is lower than the allocated quota due to reduced sugar beet
yields.

### PS&D for Centrifugal Sugar 

## 

<table>
<colgroup>
<col style="width: 13%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 8%" />
<col style="width: 9%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="11"><p>Turkey</p>
<p>Sugar, Centrifugal</p></td>
</tr>
<tr class="even">
<td></td>
<td><strong>2005</strong></td>
<td><strong>Revised</strong></td>
<td></td>
<td><strong>2006</strong></td>
<td><strong>Estimate</strong></td>
<td></td>
<td><strong>2007</strong></td>
<td><strong>Forecast</strong></td>
<td></td>
<td><strong>UOM</strong></td>
</tr>
<tr class="odd">
<td></td>
<td><strong>USDA<br />
Official</strong></td>
<td><strong>Post<br />
Estimate</strong></td>
<td><strong>Post<br />
Estimate<br />
New</strong></td>
<td><strong>USDA<br />
Official</strong></td>
<td><strong>Post<br />
Estimate</strong></td>
<td><strong>Post<br />
Estimate<br />
New</strong></td>
<td><strong>USDA<br />
Official</strong></td>
<td><strong>Post<br />
Estimate</strong></td>
<td><strong>Post<br />
Estimate<br />
New</strong></td>
<td></td>
</tr>
<tr class="even">
<td><strong>Market Year Begin</strong></td>
<td></td>
<td>09/2004</td>
<td>09/2004</td>
<td></td>
<td>09/2005</td>
<td>09/2005</td>
<td></td>
<td>09/2006</td>
<td>09/2006</td>
<td>MM/YYYY</td>
</tr>
<tr class="odd">
<td><strong>Beginning Stocks</strong></td>
<td>485</td>
<td>485</td>
<td>485</td>
<td>570</td>
<td>610</td>
<td>570</td>
<td>710</td>
<td>760</td>
<td>695</td>
<td>1000 MT</td>
</tr>
<tr class="even">
<td><strong>Beet Sugar Production</strong></td>
<td>2110</td>
<td>2110</td>
<td>2110</td>
<td>2200</td>
<td>2175</td>
<td>2200</td>
<td>2200</td>
<td>0</td>
<td>2065</td>
<td>1000 MT</td>
</tr>
<tr class="odd">
<td><strong>Cane Sugar Production</strong></td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>1000 MT</td>
</tr>
<tr class="even">
<td><strong>Total Sugar Production</strong></td>
<td>2110</td>
<td>2110</td>
<td>2110</td>
<td>2200</td>
<td>2175</td>
<td>2200</td>
<td>2200</td>
<td>0</td>
<td>2065</td>
<td>1000 MT</td>
</tr>
<tr class="odd">
<td><strong>Raw Imports</strong></td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>1000 MT</td>
</tr>
<tr class="even">
<td><strong>Refined Imp.(Raw Val)</strong></td>
<td>0</td>
<td>0</td>
<td>2</td>
<td>0</td>
<td>0</td>
<td>6</td>
<td>0</td>
<td>0</td>
<td>10</td>
<td>1000 MT</td>
</tr>
<tr class="odd">
<td><strong>Total Imports</strong></td>
<td>0</td>
<td>0</td>
<td>2</td>
<td>0</td>
<td>0</td>
<td>6</td>
<td>0</td>
<td>0</td>
<td>10</td>
<td>1000 MT</td>
</tr>
<tr class="even">
<td><strong>Total Supply</strong></td>
<td>2595</td>
<td>2595</td>
<td>2597</td>
<td>2770</td>
<td>2785</td>
<td>2776</td>
<td>2910</td>
<td>760</td>
<td>2770</td>
<td>1000 MT</td>
</tr>
<tr class="odd">
<td><strong>Raw Exports</strong></td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>1000 MT</td>
</tr>
<tr class="even">
<td><strong>Refined Exp.(Raw Val)</strong></td>
<td>25</td>
<td>25</td>
<td>27</td>
<td>20</td>
<td>25</td>
<td>41</td>
<td>20</td>
<td>0</td>
<td>50</td>
<td>1000 MT</td>
</tr>
<tr class="odd">
<td><strong>Total Exports</strong></td>
<td>25</td>
<td>25</td>
<td>27</td>
<td>20</td>
<td>25</td>
<td>41</td>
<td>20</td>
<td>0</td>
<td>50</td>
<td>1000 MT</td>
</tr>
<tr class="even">
<td><strong>Human Dom. Consumption</strong></td>
<td>2000</td>
<td>1960</td>
<td>2000</td>
<td>2040</td>
<td>2000</td>
<td>2040</td>
<td>2080</td>
<td>0</td>
<td>2080</td>
<td>1000 MT</td>
</tr>
<tr class="odd">
<td><strong>Other Disappearance</strong></td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>0</td>
<td>1000 MT</td>
</tr>
<tr class="even">
<td><strong>Total Disappear</strong></td>
<td>2000</td>
<td>1960</td>
<td>2000</td>
<td>2040</td>
<td>2000</td>
<td>2040</td>
<td>2080</td>
<td>0</td>
<td>2080</td>
<td>1000 MT</td>
</tr>
<tr class="odd">
<td><strong>Ending Stocks</strong></td>
<td>570</td>
<td>610</td>
<td>570</td>
<td>710</td>
<td>760</td>
<td>695</td>
<td>810</td>
<td>0</td>
<td>640</td>
<td>1000 MT</td>
</tr>
<tr class="even">
<td><strong>Total Distribution</strong></td>
<td>2595</td>
<td>2595</td>
<td>2597</td>
<td>2770</td>
<td>2785</td>
<td>2776</td>
<td>2910</td>
<td>0</td>
<td>2770</td>
<td>1000 MT</td>
</tr>
</tbody>
</table>

## 

## Cornstarch-Based Sweeteners

The quota for cornstarch based sweetener (SBS) producers, which was
increased from 234,000 MT to 351,000 MT (from 10 percent to 15 percent
of the total production) in recent years, is not expected to be
increased in MY 2007. The reason for this is a recent court decision
that the production quota for SBS producers cannot be increased. The
court made a decision after PANKOBIRLIK claimed to the court that the
quota increases for sweetener producers are increasing sugar stocks,
which is causing a reduction of the total quota for beet sugar producers
as a result. Thus, it is unlikely that the government will announce any
quota increase for SBS producers in MY 2007.

There are five factories producing SBS with a quota with a total
capacity of around 900,000 MT in Turkey. Two of these factories are
entirely foreign invested; two are one hundred percent domestic capital
and one is a mixture of domestic and international capital. A total of
525,000 MT of corn is used to produce SBS in Turkey. This amount
increases to 825,000 MT with the inclusion of corn-based starch. A
foreign-owned plant in Bursa has continued to have difficult relations
with local authorities and recently had to suspend operations.

## Ethanol and Molasses

Cumra sugar factory, which started operation last year, is building
another plant to produce ethanol. It is expected that ethanol production
will start in MY 2007. This will be the first and only ethanol producing
factory using sugar beets as raw material in Turkey. The annual capacity
of production will be 80,000 m3. There is only one other ethanol
producing company in the Marmara Region, which has an annual capacity of
30,000 m3 and uses corn and/or wheat as raw material depending upon
which one is cheaper.

Turkish molasses production is estimated at around 4 percent of the
total beet production. Thus, it is estimated that about 550,000 MT of
molasses are being produced. This production is being consumed as animal
feed and in the production of alcohol and yeast. A small quantity is
also being sold to the neighboring countries. The price of molasses
varies from USD 80 to USD 100 per MT, depending on location.

# Consumption

Turkish sugar consumption has been increasing parallel to the increases
in both population and confectionary exports. In recent years, increase
in sugar consumption has been lower than the increase in SBS consumption
due to lower price and ease of use of SBS in products such as such as
beverages.

SBS producers prefer to use domestically grown corn for two reasons:
biotechnology and politics. SBS are being used primarily by the soft
drink industry in Turkey. Part of this production is exported to the EU
countries. The EU soft drink industry requires that the SBS must be
produced from non-GMO corn, which forces SBS producers to use
domestically grown corn even though domestically grown corn prices are
usually higher than international corn prices. The Turkish Government
applies high duty on corn imports (130 percent) to reduce the
attractiveness of imported corn. SBS producers are also trying to use
more of the domestically grown corn for political reasons since they
have faced significant and often inflammatory criticism from sugar beet
farmers and processors.

## Prices

Turkey has some of the highest prices for sugar in the world.

+------------------------+----------------------+----------------------+
| **Turkish Sugar        |                      |                      |
| Corporation**          |                      |                      |
|                        |                      |                      |
| **Ex-factory Sugar     |                      |                      |
| Selling Prices**       |                      |                      |
+------------------------+----------------------+----------------------+
| **Type of Sugar**      | **June 18, 2004**    | **October 16, 2006** |
|                        |                      |                      |
|                        | **YTL/Kg.**          | **USD/Kg.**          |
|                        |                      |                      |
|                        | **(VAT included)**   | **(VAT included)**   |
+------------------------+----------------------+----------------------+
| Crystal Sugar          |                      |                      |
+------------------------+----------------------+----------------------+
| \- 50 Kg. bags         | 1.696                | 1.146                |
+------------------------+----------------------+----------------------+
| Cube Sugar             |                      |                      |
+------------------------+----------------------+----------------------+
| \- 50 Kg. bags         | 1.841                | 1.244                |
+------------------------+----------------------+----------------------+

The profit margin of the factories and the VAT are included in these
prices. The last column of the above table compares these prices in
current USD terms. (Note: USD 1.00 is currently about YTL 1.48)

Because of high competition faced from PANKOBIRLIK and private
factories, from time to time TSC reduces these prices and/or provides
deferred payment system in order to compete in the market.

# Trade

In recent years, Iraq has been the major market for Turkish sugar
exports. Iran, Georgia, and Azerbaijan were the other leading importers.
Exports were reduced significantly in recent years and are expected to
continue to decline since supply has been reduced and the GOT does not
provide any subsidy for sugar exports. Export and Import Matrixes
provide trade data for MY 2005 and for the first nine months of MY 2006.

## Export Trade Matrix for Centrifugal Sugar

+-----------------+-----------------+-----------------+-----------------+
| Turkey          |                 |                 |                 |
|                 |                 |                 |                 |
| Sugar,          |                 |                 |                 |
| Centrifugal     |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| Time Period     | Sep. - Aug.     | Units:          | Metric Tons     |
+-----------------+-----------------+-----------------+-----------------+
| Exports for:    | 2005            | Sep. - May      | **2006**        |
+-----------------+-----------------+-----------------+-----------------+
| U.S.            | 18              | U.S.            | 7               |
+-----------------+-----------------+-----------------+-----------------+
| Others          |                 | Others          |                 |
+-----------------+-----------------+-----------------+-----------------+
| Iraq            | 14308           | Iraq            | 22431           |
+-----------------+-----------------+-----------------+-----------------+
| Azerbaijan      | 6183            | Iran            | 6498            |
+-----------------+-----------------+-----------------+-----------------+
| Germany         | 4327            | Georgia         | 5403            |
+-----------------+-----------------+-----------------+-----------------+
| France          | 646             | Germany         | 2188            |
+-----------------+-----------------+-----------------+-----------------+
| Northern Cyprus | 569             | Azerbaijan      | 2078            |
+-----------------+-----------------+-----------------+-----------------+
| Romania         | 444             | Pakistan        | 1087            |
+-----------------+-----------------+-----------------+-----------------+
| Lebanon         | 109             | Northern Cyprus | 788             |
+-----------------+-----------------+-----------------+-----------------+
| Israel          | 67              | France          | 495             |
+-----------------+-----------------+-----------------+-----------------+
| Kuwait          | 66              | Lebanon         | 130             |
+-----------------+-----------------+-----------------+-----------------+
| Libya           | 57              | Kuwait          | 95              |
+-----------------+-----------------+-----------------+-----------------+
| Total for       | 26776           |                 | 41193           |
| Others          |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| Others not      | 341             |                 | 232             |
| Listed          |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| Grand Total     | 27135           |                 | 41432           |
+-----------------+-----------------+-----------------+-----------------+

## Import Trade Matrix for Centrifugal Sugar

+-----------------+-----------------+-----------------+-----------------+
| Turkey          |                 |                 |                 |
|                 |                 |                 |                 |
| Sugar,          |                 |                 |                 |
| Centrifugal     |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| Time Period     | Sep. - Aug.     | Units:          | Metric Tons     |
+-----------------+-----------------+-----------------+-----------------+
| Imports for:    | 2005            | Sep. - May      | **2006**        |
+-----------------+-----------------+-----------------+-----------------+
| U.S.            | 44              | U.S.            | 18              |
+-----------------+-----------------+-----------------+-----------------+
| Others          |                 | Others          |                 |
+-----------------+-----------------+-----------------+-----------------+
| United Kingdom  | 1136            | Belgium         | 2675            |
+-----------------+-----------------+-----------------+-----------------+
| Germany         | 709             | United Kingdom  | 2225            |
+-----------------+-----------------+-----------------+-----------------+
| Netherlands     | 150             | Germany         | 1182            |
+-----------------+-----------------+-----------------+-----------------+
| France          | 112             | France          | 89              |
+-----------------+-----------------+-----------------+-----------------+
| Denmark         | 83              | Italy           | 24              |
+-----------------+-----------------+-----------------+-----------------+
| Spain           | 17              | Spain           | 15              |
+-----------------+-----------------+-----------------+-----------------+
| Italy           | 13              |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
|                 |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
|                 |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
|                 |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| Total for       | 2220            |                 | 6210            |
| Others          |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| Others not      |                 |                 |                 |
| Listed          |                 |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| Grand Total     | 2264            |                 | 6228            |
+-----------------+-----------------+-----------------+-----------------+

# Stocks

Sugar stocks have declined because of the GOT policy to restrict the
total amount of sugar and SBS production.