Introduction
Over the past decades, sugar trade and sugar consumption all around the globe has increasingly raised. Approximately 46.1 million metric tons are officially and exported every year making a market value of over 17.1 billion $. Moreover, cane sugar sold as compliant accounts for 1% of exports at the same year that the research was deducted. As we underline the importance of the sugar cane trade in the world trade, recent charts have shown that the sugar market is undergoing a highly important economic growth during the last decade (2006-2016). Remarkable as it may seem in the middle of this ongoing process, 2012, the annual economic growth rate was in 106% with signs of even higher and advanced growth in the foreseeable future. Additionally, it seems to be a country-orientated oligopoly market with the powerhouses of Brazil, India and China dominating, having combined the 86% of the global sugar trade. As far as premiums and pricing are concerned there is a 10 to 15% premiums range for organic sugar and up to 21 % for double-certified Fairtrade compliant sugar. Having already mentioned the above, this chapter aims to provide an in-depth analysis of the market, thoroughly examine the demand and supply for sugar trade and assures that at the end of this chapter will be laid out a -regarding the circumstances- accurate forecast for the future price of the commodity.
Production centres
Global production for the Marketing year 2018-2019 is 181 million tons (raw value) as higher production is indicated in Brazil as it has been already mentioned, that alone accounts for almost 52% of the sugar market, but also in the European Union. Regarding Brazil, as the major player produced 37.3 million metric tons in the year 2018/2019, but it has to be mentioned that this was the lowest production level since 2009, due to the poor conditions that are taking place, like low prices and droughts. But, the Brazilians are very well equipped to run on sugar and ethanol market –very important as an alternative fuel– and they have proven that their production is very effective and efficient. As a result, consumption, exports and stocks are all up, due to the high production level.
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EU sugar production faced an almost 20% increase in the year 2017/2018 in the average of the last years and it was even more stable, as it seems the next year, since the prices followed the tendency to fall. The fact that sugar production is rising up to that levels, also means that a big quantity of jobs are provided, for instance, there are roughly 145,000 sugar beet growers in the EU, spread between 20 different Member States and with around 28,000 direct jobs in the sugar beet processing sector. But, consumption is projected to be slightly lower as EU domestic sugar consumption has been stagnating for the last few years, mainly because of the consumer preferences for lower sugar containing diets.
India was the first country to ever produce sugar and inconceivable as it may seems its production part has taken a decline turn resulting in a reduction of 8 percent of the total production and exports. That is quiet incredible if someone considers that India is expected to be one of the major trade exporters in the future with economic and population growth that exceeds the single digital numbers percentage-wise, leading the consumption level to a record.
Thailand’s record levels are also rising (10.02 million metric tons in 2018/2019), due to the expanded acreage of the geological configuration of the country and the favorable weather conditions. Because of the higher returns and profit, a big quantity of Thailand’s farmers turned their interest from cassava to sugar production, increasing, even more, the production level. About the consumption level, it is also slightly up, because of the demand for direct sugar consumption.
Last but not least, the production of sugar in China is steadily decreasing reaching the level of 11.47, but the huge domestic demand-led China to be the largest importer of white sugar in the world with the result of facing huge tariffs and permits and the stocks are expected to fall for a fifth consecutive year due to the gap between domestic consumption and production.
In the Figure 2 is more clearly visible the importance and the level of the sugar producing countries around the globe. But it has to be noticed, that mainly a percentage of 70-80% of the supply of sugar is absorbed by the origin-country. This phenomenon occurs as a consequence of the fact that the majority of the countries heavily subsidize sugar farmers and place tariffs in sugar imports.
Figure 2 Production Centers of Sugar
Source: https://www.iisd.org/sites/default/files/pdf/2014/ssi_2014.pdf#page=267
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