International scenario of Sugar Market

Global markets

Sugar is produced in more than 100 countries and is widely traded

Sugar is produced in around 122 countries across the world. It is extracted from two different raw materials, sugarcane and sugar beet. Sugarcane is cultivated under tropical climates, while sugar beet is grown in temperate regions. Around 79 per cent of the sugar produced in the world is produced from sugarcane, with beet sugar accounting for the rest. The choice of sugarcane or sugar beet for sugar production is influenced by weather conditions, crop diseases, soil quality, international trade agreements and domestic price support programmes. Producing sugar from cane is less expensive than producing it from beet. Of the 122 sugar producing countries, 67 produce sugar from cane and 55 from beet.

Asia ranks first in respect of area under sugarcane, followed by South America, Central America and the Caribbean. Sugar beet is mainly produced in Europe and, to a lesser extent, in Asia and North America. Brazil, India, Thailand, Australia and Cuba are the largest sugarcane producing countries. The European Union is the largest beet sugar producer. Other beet sugar producing countries include the US, Turkey, Ukraine, Poland and Russia. 

Sugar is a widely traded commodity. On an average, about 70 per cent of world sugar production is consumed in the country of origin, and the balance 30 per cent is traded in the international markets. A part of the international sugar trade occurs under specific agreements (preferential trade, long-term agreements) that, in some cases, include clauses on import prices.

The international sugar market is highly distorted

The international sugar market cannot be considered free and fair. High domestic support, in the form of guaranteed prices and production quotas; the presence of import barriers in the form of high import tariffs and restrictions of market access, have distorted international trade in sugar. Countries, that would otherwise have been net importers, are actually net exporters of sugar.

Developed countries such as the European Union and United States are the worst offenders in this regard. The EU and the US protect their domestic sugar industries through stiff import duties, quota barriers and market access restrictions, in order to maintain their domestic prices at a high level. The protectionist policies followed by the EU and US have had a dampening effect on world sugar prices, and deprived low-cost sugar producers in developing countries of export opportunities that they might otherwise have had. The EU has now begun the process of reforming its sugar policy.

The following points further point out to the distortions in world sugar trade:

·         Domestic prices of 90 per cent of the sugar sold are higher than international prices.

·         Forty per cent of world sugar production is sold in domestic markets at prices 50 per cent to 400 per cent higher than those in the international market.

·         Production of 40 per cent of the sugar is highly subsidised.

·         If the international sugar market becomes fully free and fair, world sugar prices will increase sharply (estimates range from 35 per cent to 40 per cent) and the international sugar industry will shift from inefficient regions to efficient regions.