From the International Sweetener Symposium:
Napa, Calif.—Global sugar subsidies are on the rise, while sugar prices continue to slump. That’s according to International Sugar Organization Executive Director Peter Baron.
“The accumulated world sugar surplus over the past three seasons has taken the global stocks-to-consumption ratio to above 40 percent for the first time since 2007/08,” he told attendees at the 30th International Sweetener Symposium.
“The resulting low sugar prices should continue for the foreseeable future as a result.”
The stocks-to-consumption ratio measures surpluses, and that number has been steadily growing as production climbs. Baron explained that Brazil and Mexico have seen the most production growth, rising 6 million metric tons and 2 million metric tons respectively in the 2012/13 growing season.
Such rapid production growth in those countries is particularly problematic for U.S. farmers, says Jack Roney, an economist with the American Sugar Alliance.
“Brazil controls about half of all sugar exports around the world and largely controls global prices, which have a profound effect on U.S. prices,” he said. “And the U.S. market has become a dumping ground for subsidized Mexican surpluses, which has sent oversupplies here to an all-time high and domestic prices back to 1980s levels.”
Roney believes the solution to today’s low-price environment is the elimination of market-distorting subsidies. He said Brazil’s $2.5 billion a year in subsidies and government ownership within Mexico should be a first order of business. ASA has endorsed a “zero-for-zero” sugar policy that would eliminate U.S. sugar policy once foreign subsidies are addressed.
Baron agrees that reduced government intervention is needed for the global market to operate effectively. Such intervention, he said, artificially affects prices and leads to inefficiencies. He believes the World Trade Organization still remains the best venue to target subsidization despite the body’s inability to make progress in recent years.
Baron noted that price volatility makes the global market unreliable. Only 30 percent of sugar grown around the world is actually traded on the global market, with 70 percent being consumed in the country where it is grown, he explained. “The situation with domestic prices in some major domestic markets is quite different than the dynamics of world market values,” Baron said.
For more information about the International Sweetener Symposium, visit www.sugaralliance.org
Symposium audio files can be downloaded at www.ASAradio.org