Food Outlook November 2007 - Sugar
The prospect of a consecutive sugar surplus for 2007/08 weakens international sugar prices

World sugar prices fell to United States 9.29 cents per pound in June 2007 which is nearly 52 percent less than the 25-year highs reached in early 2006. After recovering to United States 10.17 cents per pound in July, prices declined to United States 9.81 cents per pound in August and to United States 9.76 cents per pound in September, resulting in a price average for the first nine months (January-September) of 2007 of United States 10.01 cents per pound1/; 37 percent lower than the corresponding price average in 2006. Ample supplies in exporting countries, particularly the return of India from a net importer to a net sugar exporter after two consecutive years of production setbacks, were the key factor behind the price decline.

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THE RISE IN CRUDE OIL PRICES STIMULATES ETHANOL-RELATED DEMAND FOR AGRICULTURAL COMMODITIES

Worldwide interest in ethanol fuel

With crude oil prices reaching historically high levels, the global prospects for ethanol fuel use are growing. Ethanol production, derived from starch and sugar crops such as sugar cane and cereals, expanded by 53 percent from 30 billion litres in 2000 to about 46 billion litres in 2005. It is expected that world ethanol consumption will reach 54 billion litres by 2010, accounting for about 1 percent of world oil consumption (which is estimated to exceed 5 151 billion litres by 2010 according to the World Energy Council [2005]). Apart from concerns over high oil prices, the growing interest in ethanol fuel has other notable motives. These include: the need to diversify energy sources, the desire of many countries to meet their greenhouse gas abatement targets under the Kyoto Protocol, and the need to stabilize commodity prices and cut down on agricultural subsidies in line with WTO provisions. Thanks to advances in technology and policy incentives, the ethanol fuel industry is no longer restricted to a few countries (i.e. Brazil, Japan and the United States) but is building momentum in other parts of the world, including China, India and Thailand. The increase in ethanol use has the potential to create a substantial demand for energy related agricultural products, and to further impact on commodity markets. [ more... ]

The impact of European Union sugar policy reform on developing and least developed countires (from the Commodity Market Review)
Radical changes in the Common Market Organization for sugar have recently been agreed by the EU agricultural ministers. These will interact with preferential trade initiatives and with the need to comply with the outcome of the trade dispute on export subsidies. Apart from EU sugar producers, the reform will affect developing countries and least developed countries that depend on the preferential treatment they enjoy for sugar exports to the EU. This paper focuses on the impact of the EU sugar policy reform and the Everything But Arms initiative on the African, Caribbean and Pacific countries, the least developed countries and the European Union. We develop an empirical model structure comprising a partial equilibrium model for the sugar market and a gravity model to replicate least developed countries’ bilateral trade with Europe. Domestic support and other policy instruments are included in the partial equilibrium model, whilst gravity is used to model the abolition of import tariffs for sugar originating in least developed countries subject to trade costs. Results suggest that sugar production in the European Union will contract, leading to a significant decrease in unsubsidised exports. African, Caribbean and Pacific countries will experience significant reduction in their export revenue, whilst the initial impact on least developed countries may be limited, but increasing in the medium run. [ more... ]

Fao Trade Policy Technical Notes - No. 6. Sugar: the impact of reforms to sugar sector policies - a guide to contemporary analyses
This technical note is intended as a guide to assist in the interpretation of a range of existing analytical studies of the impact of current sugar sector policies on world market conditions and on developing country producers, and of the insights that these studies can provide (and those that they cannot) in determining the potential impacts of future reform initiatives. This is especially important in the case of the sugar sector, since recent announcements of major reforms are yet to be fully incorporated into contemporary analytical studies. [ more... ]

FAO's participation in the 5th WTO Ministerial Conference, Cancun, Mexico (10-14 September 2003) - Important commodities in agricultural trade: Sugar
Sugar production and exports are crucial for many developing countries, but trade and prices have been falling.

Domestic support and tariff levels are high in developed countries, creating huge trade distortions.

The Uruguay Round produced only a small reduction in trade distortion; significant progress in the Doha Round is important for many countries. [ more... ]

The Brazilian ethanol programme: impacts on world ethanol and sugar markets, by Tatsuji Koizumi. FAO Commodity and Trade Policy Research Working Paper No. 1.
The sugar market in Brazil has a strong relationship with the ethanol market. The Brazilian government has now abolished all the sugar market intervention measures except for the control on the ethanol-gasoline blend ratio. [ more... ]