With so much going on in the world this week, chances are good that you missed a handful of important – albeit not-so-widely-read – sugar stories. So, we’ve flagged them for you and offered a little context.
The volatile world sugar market reminded us once again why it cannot be trusted to provide stable supplies. As Reuters noted in an April 1 article:
A drop in exports from Thailand and India has contributed to forecasts for a widening global supply deficit this year fuelling a rally in international prices to a 17-month peak last week…
So why would the market fluctuate so much after just one drought in Thailand? Because the international sugar market is not an open and free market. It is a dump market made up of subsidized surplus sugar that is dominated by a handful of countries like Brazil, India, and Thailand.
And those countries don’t always get along. Which brings us to news of Brazil filing a complaint with the World Trade Organization (WTO) over the legality of Thailand’s sugar subsidies – a case we hope Brazil wins, but one that could ultimately make the global market even more heavily concentrated.
An April 5 Reuters article provided some perspective into the case:
Thailand also provides additional payments to cane sugar growers and subsidies to convert agriculture land from rice to cane production, and to develop additional capacity to manufacture cane into sugar, it said…
Talk about the pot calling the kettle black. Of course, this isn’t the first time that Brazil, which boasts more than $2.5 billion a year in subsidies itself, has used the WTO system to target a competitor. It filed, and won, a similar case against the European Union in 2006.
That case not only drove many EU sugar farmers out of business, but a lot of farmers from former European colonies who depended on the EU market as well. To ease the pain, EU farmers will be getting $665 million a year in government checks. Europe also supplied its colonies with transitional subsidy payments, but those payments are soon ending.
The reform of the EU’s Common Agricultural Policy in 2006 prompted it to establish a sugar adjustment scheme called the Accompanying Measures for Sugar Protocol countries (AMSP). AMSP supports restructuring initiatives in ACP countries that traditionally exported sugar to the EU.
Sadly, St. Kitts & Nevis gave up sugar production entirely after 2006. When you read stories like this, it is painfully obvious that the subsidy programs so prevalent in the sugar world today are not working for anyone. So what can be done?
Some critics of U.S. sugar producers say nothing, and simply want to flood the U.S. market with subsidized foreign sugar, drive Americans out of business, and increase dependence on Brazil and other exporters.
But a conservative columnist with The Hill said that would be a big mistake, noting in an April 6 article that ending U.S. sugar policy should be “contingent upon other major sugar producers doing the same.”
“That approach, which was introduced by Rep. Ted Yoho (R-Fla.),” he added, “is one that both the sugar producers and big candy confectioners should be able to agree upon.”
Well said. The sugar market would be better off without any government subsidies, and Yoho’s Zero-for-Zero sugar program is the only way make it happen.