FOR IMMEDIATE RELEASE: August 3, 2015
CONTACT: Phillip Hayes, 202-271-5734 (cell)
From the International Sweetener Symposium:
SANTA ANA PUEBLO, N.M.—When global sugar prices began tanking more than three years ago, analysts predicted that worldwide production would fall and prices would quickly rebound. But the opposite occurred with prices recently dipping to the lowest point since 2008, and most observers now expect the slide to continue.
“The global sugar market is oversupplied, there is no doubt about that,” said Maria Afonso, the global sugar analyst for American Sugar Refining, today at the 32nd International Sweetener Symposium.
Afonso, who believes the “near-term fundamental outlook for sugar prices is negative,” told the group that low-prices are currently affecting numerous commodity markets, which she partially attributes to surpluses made possible by foreign government policies and devalued currencies.
Global sugar prices are currently running half the world average cost of producing sugar, yet production continues to grow. Thailand, the world’s second biggest exporter, for example, has expanded exports 70 percent since 2011 and has announced intentions to grow another 50 percent over the next five years.
Antoine Meriot, a French agricultural economist who traveled to Thailand to examine its industry, said Thailand’s disconnect between prices and production decisions is a result of subsidies insulating farmers from economic consequence.
“Thailand subsidizes its growers at least $1.3 billion a year,” he told the group, citing a study he released in June.
Thailand’s sugar policy is patterned after the old European Union domestic marketing quota system, which was declared illegal by the World Trade Organization a decade ago. Meriot explained this quota system is supplemented by other programs, such as payments to growers when prices fall; preferential government loans; subsidies to offset input costs; government control over prices and planting decisions; ethanol subsidies; and tariffs to block imports.
Europe began overhauling its programs in 2006 by easing marketing quotas and price supports, but has recently announced additional changes to bring sugar support in line with other EU agricultural subsidies. These changes will help its industry better deal with today’s low-price environment.
Patrick Chatenay, a sugar policy expert from the UK-based company ProSunergy, described the changes to the group.
“Europe will totally abolish its old sugar support system in October 2017 but continue to pay roughly $665 million in direct subsidies to sugar growers every year,” he said. “In addition, the EU will continue to limit sugar imports with standard high tariffs and with GMO restrictions, which generally are supported by the electorate.”
Chatenay predicts Europe’s new subsidies will help the region again become a net sugar exporter on the global stage, and he believes that this development will only further depress global prices.
Subsidies have also increased in Brazil, India, and other major producing countries, he explained, as countries fight to maintain market share or protect domestic industries against the distorted world market.
Chatenay noted that despite the low price on the global market, very little sugar is actually reaching consumers at that price.
“In almost all countries, refined sugar in domestic wholesale and retail markets is much higher than the world price,” he said. “This is usually the result of government intervention and taxes, and higher in-country prices also help growers around the world cope with an otherwise depressed situation.”
The American Sugar Alliance, which sponsored the conference, is hoping to draw more attention to the distorted nature of the world sugar market and increased subsidization.
U.S. producers do not receive government subsidy checks, and ASA has publicly pledged to support elimination of America’s existing no-cost policy of import tariffs and operating loans if foreign subsidies can be rolled back.
Congressman Ted Yoho (R-FL) introduced a resolution known as the global Zero-for-Zero sugar policy to do just that.
For more information, visit www.sugaralliance.org
Symposium audio files can be downloaded at www.ASAradio.org