A February article by Bloomberg noted that the glut of unneeded sugar holding down prices isn’t likely to subside anytime soon. As the news service put it:
The global sugar surplus will extend to a fifth year as government support and weakening currencies in producing countries partly make up for lower prices.
The run up in subsidization by the world’s two biggest sugar producers—Brazil and India—has caused a lot of the market’s problems, and it has been well chronicled by the American Sugar Alliance.
Last summer, Brazil announced a $480 million bailout package for its sugarcane ethanol industry, forked over $65.2 million in new subsidy checks to sugarcane growers, and admitted to the WTO that it has doubled subsidies in the past three years. And on Feb. 17, it unveiled a new $620 million, state-funded investment program.
More recently, India, the world’s second biggest sugar producer, has enhanced its policies in a subsidy arms race with Brazil. On top of its mandated pricing scheme, India has just announced $1 billion worth of interest free loans, new tax breaks, and other incentives to help sugar producers boost exports. In addition, the country approved on Feb. 12, new direct export subsidies.
Now it appears these countries are also getting a leg up on the competition with weakening currencies. Bloomberg explained it this way:
The Brazilian real depreciated 13 percent against the U.S. dollar last year and the Indian rupee slid 11 percent, helping compensate the world’s top and second-largest producers, which sell their sweetener in dollars, for lower prices. Raw sugar futures fell in the past three years on ICE Futures U.S., the longest losing streak in more than two decades.
If a free market for sugar is ever going to form, the time has come for all countries to start playing by the same rules. The best businesspeople, not the most subsidized should be rewarded.