World sugar prices are depressed and are likely to remain in the doldrums over the coming year as surpluses overhang the market. That’s according to a Dec. 24 report issued by Rabobank, one of the largest banks in the world and key lender to the U.S. food industry.
Rabobank pointed to the growing cycle of sugar cane, which is a semi-perennial crop that prevents producers from quickly downshifting production, as a factor in the continued oversupply.
True, but the rise in foreign subsidization is also helping insulate many growers from market pains and slowing the natural response to low prices of planting less.
Just last week, reports surfaced that India is poised to increase its export subsidies, which are already significant and have come under international fire.
According to a January 8 Reuters story:
India’s cabinet could soon approve an increase in the raw sugar subsidy paid to mills to about 4,000 rupees ($64) per tonne as it looks to cut large stockpiles, two government sources with direct knowledge of the matter told Reuters.India, the world’s biggest producer behind Brazil, paid a subsidy of 3,300 rupees to produce and export raw sugar in the season that ended in September.
And Pakistan just announced measures to subsidize its producers by aiding the export of 650,000 tons of surplus sugar.
Ironically these subsidies, which are meant to shelter producers from artificially low prices on the world’s dump market, will only further manipulate prices and exacerbate the problem.
The time has come to end all global subsidies and let a true market form. The zero-for-zero sugar policy is a great place to start.