In an abrupt about-face, Brazil’s Minister of Agriculture Blairo Maggi recently condemned the kind of Brazilian subsidization that has, for decades, wrecked the world’s sugar market.
“Subsidy attracts incompetence in some areas, and doesn’t allow the sectors to succeed through competitiveness,” he was recently quoted as saying in an Aug. 25 article that appeared in SugarOnline.com.
When pressed by reporters for examples of such “incompetence,” Maggi pointed the finger squarely at Brazil’s sugarcane ethanol industry.
“To have efficiency with ethanol, you need to produce a lot of sugarcane, it has to be 100, 120 tonnes per hectare,” he said. “These companies … lost productivity and instead of 100 tonnes, produce 60 tonnes.”
This is quite an admission by a high-ranking official in a country that controls nearly half of the globe’s sugar trade and has been providing about $2.5 billion a year in sugar and ethanol support to prop up its producers.
In fact, Brazil is largely responsible for the see-saw nature of global sugar prices, which swing wildly based on Brazil’s subsidy levels, its ethanol outputs and its currency valuations.
Maggi is in good company with his critique.
The U.S. sugar industry has also criticized global sugar subsidies and asked that major exporters like Brazil do more to embrace free-market principles where the best businesses – not the most subsidized – are rewarded.
This concept, known as the Zero-for-Zero sugar policy, would amount to a worldwide subsidy cease fire so that prices for sugar sold on the world market would more accurately reflect production costs. That way, foreign sugar producers could get their returns from the marketplace instead of government coffers, like U.S. sugar producers.
Some detractors – namely large candy companies that benefit from global subsidization of commodities – have called such a concept impossible. Apparently it’s not. Especially when leaders in the world’s most dominant agricultural hubs – Brazil and the U.S. – agree that a subsidy-free approach in the sugar sector is in the best interest of all.
Now we just need Brazil to follow through and actually stop bankrolling its sugar and ethanol industries.