“A good crop would even be better if we had good prices,” according Phillip Hayes, Director of Media Relations for the U.S. Sugar Alliance. Northern Ag Network recently talked with Hayes, who expressed frustration in worldwide sugar subsidies. That frustration was so elevated that he says the Alliance is now willing to compromise U.S. sugar policy if other countries will compete on the global market without subsidies.
Mexico
According to Hayes, U.S. prices have been greatly depressed by Mexico. Mexican production, he says, is heavily subsidized by their government which has been “dumping sugar” into the U.S. market. The government in Mexico actually owns and operates 20{28d451f77a4de8a52cd2586be6cc1800527fe70ea84e8b3f90098495d088e086} of the sugar industry.
Correcting that problem has been a big focus for the Alliance this year. As recently as last week, producers submitted comments to the U.S. Department of Commerce to ensure that the draft agreements reached between the U.S. and Mexican governments to suspend pending trade cases against Mexico’s sugar industry can be effectively enforced. Mexico, however, is not the only country that is bringing a challenge to the market.
Brazil
Brazil controls 50{28d451f77a4de8a52cd2586be6cc1800527fe70ea84e8b3f90098495d088e086} of global sugar exports. “Think of Brazil as the OPEC of sugar,” Hayes told Northern Ag. To put it into perspective, he adds that Saudi Arabia only controls 19{28d451f77a4de8a52cd2586be6cc1800527fe70ea84e8b3f90098495d088e086} of crude oil exports. As goes Brazil, so goes the global price of sugar. According to Hayes, Brazil subsidizes their sugar producers to the tune of $2.5 billion dollars annually and they've added billions to that in the past couple of years to help the struggling industry. Why is it struggling? According to Hayes, it’s because other countries are adding to their subsidies as well.
Thailand & India
Behind Brazil, Thailand and India are the next biggest players when it comes to world sugar. India, says Hayes, has “ladled lots of exports onto their growers in this past year.”
He also says that Thailand has rapidly increased their production. This is because their government is encouraging their rice farmers to get out of the rice business. The Thai government previously paid a 50{28d451f77a4de8a52cd2586be6cc1800527fe70ea84e8b3f90098495d088e086} premium to rice farmers for their crop. They then created a massive, state-run storage program to keep that rice off the market. Thinking they would short the global market of rice and be able to sell their rice at a premium, they were disappointed when Vietnam and India subsequently increased their rice production. Global rice prices never rose and, Hayes says, Thailand is now sitting on a pile of rice that they can’t sell. Now, to get rid of the rice, they’re trying to transition their farmers via subsidies to move to sugar production rather than rice farming.
Price Distortion
According to Hayes, sugar is by far the most distorted commodity when you look at the world market. The average price of sugar runs at about half of the average cost of production. “What that means,” says Hayes, “is that you lose money for every pound of sugar you sell on the global market.” This means that the only way you can make money off of sugar is to have subsidies.
Zero for Zero Sugar Policy
Realizing these sugar subsidies in foreign countries are what are weighing so heavily on the prices of world sugar, Hayes says that U.S. producers are willing to forfeit U.S. sugar policy in the hopes that others will also give up their subsidies. Pushing a “Zero-for-Zero” sugar policy, the American Sugar Alliance is encouraging U.S. trade officials to go through the World Trade Organization and other trade deals to systematically eliminate foreign sugar subsidization. What they've offered up in return is U.S. sugar policy. “We’ll get rid of U.S. sugar policy,” Hayes said, “if other countries will do the same and let the best business people win.”
For more information on the Zero-for-Zero campaign, CLICK HERE.
© Northern Ag Network 2014
Haylie Shipp
