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K.S. Mulherin


The world sugar economy is characterized by a combination of complex problems affecting both developing and developed countries whether they export cane or beet sugar. It is faced with recurring supply/demand imbalances reflected in extremely volatile prices on free markets. Over the past five to six years, world free market prices have been severely depressed and in 1985 probably reached all time lows. This situation has of course had most unfavourable repercussions on farm incomes and commodity exports from many countries, particularly developing countries which depend on sugar for a large proportion of their export earnings.

Sugar cane and cane sugar exports are the mainstay of many developing countries principally in Latin America and the Caribbean but also in southern Africa, Asia and the Pacific. Even with the “rock bottom” prices prevailing on export markets in recent years, sugar still accounted in 1984 for US $8 000 million in export income or nearly 10 percent of the total value of agricultural exports of all developing countries, including fishery and forestry products. Again despite the low prices, sugar was second only to coffee as an individual source of export income for developing countries and a larger earner than all cereals, livestock products, forestry and fishery products. This highlights the dependence of developing countries on cane sugar exports and the pressures which they must be under because of the drastic decline in sugar revenues.

To further emphasize the relative weightings and importance of sugar to developing countries it might be added that 70 percent of world sugar output is produced in developing countries and 85 percent of cane sugar. Similarly, developing countries account for 65 percent of total world sugar exports by volume, including 80 percent of cane sugar exports. In global terms cane sugar accounts for about two-thirds of total world sugar exports and beet sugar one-third.



An analysis of world sugar markets over the past 20–25 years indicates that production has more than doubled from 50 to 100 million tons and so has consumption, but that in most years since 1960, world production has in fact exceeded consumption. In the twenty-five years from 1960 to 1985, there have only been eight years with a production deficit caused in each case by a crop failure in one or more major producing countries. In each of the periods in which deficits occurred - 1962/63, 1971/74 and 1979/80 - prices rose strongly and quickly, but subsequently declined with equal rapidity (Figure 1). It can therefore be taken for granted that production will be sufficient to satisfy demand except in those years which have accrued in the past at about six to seven year intervals when adverse weather in major producing countries causes shortfalls in supply which are significantly above normal. It would appear that producer/exporters operate under the assumption that they will do sufficiently well in the good years around the top of the cycle to carry them over the lean years around the bottom.

A number of other elements must be taken into account in looking in particular at production trends - one has been an increasing tendency, particularly evident since the mid-seventies, of some major developed importing countries, towards protectionism, i.e. to assist producers to reach or maintain a level of output that would not be economically feasible if they were exposed to international prices another has been the tendency for many developing countries to adopt programmes to increase their level of self-sufficiency in sugar or even to attain self-sufficiency. Many of these programmes were conceived during periods of high prices and aimed at saving foreign exchange but in many instances cost was not the primary consideration in their implementation, since it would usually have been much cheaper over time to import sugar.

A third element has been the misreading by countries of the cyclical periods of high prices. All too often there has been a false optimism that these boom periods would last, which led to accelerated increases in production which in turn accentuated the price collapses which inevitably followed. Such considerations undoubtedly influenced the EEC sugar regime when the planning of its production quotas for the second quota period (1975–81) coincided with the 1973/74 sugar price boom.

Technological advances have also played a major role in production increases in both developing and developed countries. Improved cane varieties, new disease and pest control measures and better farming practices have raised yields appreciably and improved mill technology has also raised sugar extraction ratios in sugar factories.

Finally, the tendency for national policy considerations to obscure the global picture - the separation of supply, which appears to have a life of its own, from demand can be summed-up in one figure - it has been estimated that by 1983/4 world sugar production capacity at factory level was about 120 million tons (compared with 1984 consumption of 94 million tons). Agricultural capacity was of course less but it must be emphasized that both cane and beet sugar have a potential for rapid expansion and there is a large pool of sugar cane which could be used for production of sugar if the price warranted, either by increasing productivity for example through higher fertilizer application, irrigation, or by diverting cane from other uses (e.g. from non-centrifugal sugars in India or from ethanol in Brazil). As evidence of the expansion capacity of sugar production it may be noted that world production rose by 8 million tons or 10 percent between 1980 and 1981 in response to high prices prevailing at the time and in the following year by another 9 million tons, a total increase of 17 million tons or 20 percent in two years.


World consumption of sugar also doubled between 1960 and 1965 from 49 million to 99 million tons, but the overall growth rate covers widely divergent trends. In per caput terms world consumption of centrifugal sugar currently fluctuates at about 20 kg per head, i.e. around 38 kg in developed countries and 14 kg in developing countries, which compares with 33 kg and 8 kg respectively in 1960. Per caput consumption continued to grow in both developed and developing countries until the mid-seventies, although at a much faster rate in developing countries, where per caput consumption was low and income and price elasticity of demand were also high. Thereafter, per caput consumption of developing countries continued to rise strongly, although in the past year or two there have been some indications of a levelling out of demand. This has occurred despite the availability of cheap sugar on world markets and reflects foreign exchange difficulties faced by low income developing countries and the impact of lower oil prices on the incomes of the oil exporting countries.

Since the mid-seventies there has been a declining trend in per caput consumption in developed countries concentrated among net importers of raw sugar, notably the United States, Canada and Japan. In all three, and in the United States in particular, sugar has been subject to increasing competition from a caloric sugar substitute, high fructose corn syrup (HFCS), developed commercially in response to the prevailing high sugar prices of 1973/74. It has proved completely substitutable for sugar in many areas in the bakery, confectionery and soft drinks industries. As a result, its use in the United States has risen from zero in 1970 to nearly 2 million tons by 1980, to an estimated 4.7 million tons in 1985. Over the same period (i.e. from 1970 to 1985) United States sugar consumption has declined from 10.5 million tons to 7.3 million tons.

The gains of HFCS have been made on the basis of price but in developed market economy countries there have also been changes in dietary patterns caused partly by changes in the demographic structure and social habits of the population. There has been a decline in required daily calorie intake and a trend towards low calorie foods which has adversely influenced sugar. As a result new low or non-caloric sweeteners have emerged in recent years, one of which, aspartame, has made dramatic inroads into the sweetener market. Aspartame use in the United States alone has risen from 20 tons in 1980 to 1.2 million tons in 1985. It has no doubt caused some displacement of sugar but has also had an impact on other sweeteners including HFCS and particularly on saccharin.

In developing countries following steady growth in the sixties, there was a surge in per caput consumption from 1975–79 coinciding with the availability of cheap sugar, especially white sugar from the EEC and the general growth in incomes particularly of oil exporting countries. But higher prices in 1979–81 and the economic recession thereafter restrained consumption, at least in low income developing importing countries.

A particularly notable feature in the overall expansion of consumption in developing countries has in fact been the rapid growth in those countries which are traditional net exporters. In these countries, notably India and Brazil, consumption growth is less directly related to income than to the availability of sugar. Sharp rises in the late-seventies and early-eighties in these countries were closely linked to stock accumulations and export limitations under the International Sugar Agreement. As stocks were run down in India for example, consumption declined and in fact with one or two bad crops, India has been temporarily importing sugar. But it should be noted that per caput consumption of sugar is as high in a number of developing exporting countries where sugar is in abundant supply, as in developed countries.

Overall consumption in developing countries has increased substantially over the last twenty-five years from 16 million tons or one-third of world consumption to 50 million tons 53 percent of world consumption in 1985. About half of this growth has been accounted for by imports.


Despite its overwhelming importance to individual exporting countries, international trade in sugar has always been marginal compared with production and consumption, because of the wide geographical spread of sugar production. While both production and consumption doubled between 1960 and 1985, world trade in sugar rose by only 50 percent. The share of total trade in production actually declined from 36 percent in 1960 to 28 percent in 1984. However, there have been major structural changes in the pattern of sugar trade. During the sixties developing countries accounted for only about 25 percent of world imports. This share rose rapidly in the seventies to 45 percent and currently is slightly over 50 percent so that net imports of developing countries have in fact in absolute terms almost trebled since 1960. Over the same period the share of imports of developed market economy countries fell, while the share of developed centrally planned economy countries rose from nil to 15 percent.

A great deal of this increase in exports to developing countries has accrued to developed rather than developing countries. In 1984 about 55 percent of developing country imports were drawn from developing countries compared with 45 percent from developed. In 1970 the percentages were 60 and 40 percent respectively. During the period the total share of developing countries in world exports declined from 85 percent in the early 1960s to around 70 percent, reflecting initially expansion by some developed cane sugar exporters, notably Australia, and since the mid-seventies the very substantial exports of white sugar from the EEC. Exports from the Community rose from 0.7 million tons in 1975 to a peak of 5.6 million tons in 1982 and were over 4 million tons in 1984. The Community is in fact the world's leading exporter to the free market.

The decline in developed country imports has occurred since the mid-seventies and is concentrated in the United States, Canada and Japan. In all three countries domestic production has been maintained despite falling consumption and the adjustment has been entirely affected by reducing imports. In the United States, the price and quota mechanism to support domestic producers has provided an umbrella for the growth of competitive sweeteners, in particular HFCS, as low cost sugar producers have been effectively disbarred from competing against them on a price basis. Similarly in Japan the high internal price supported by high duties and a consumption tax on sugar also provided a climate for HFCS expansion which, however, was partially offset in 1982 by the introduction of a surcharge on imports of raw materials to produce HFCS. To illustrate the impact of these changes, United States imports for example have declined from 4.8 million tons 1970 to 2.3 million tons in 1985 and the approved base quota for 1986 is only 1.5 million tons. It is true of course that countries fortunate enough to have a quota in the United States market receive a price well above the world free market level but on an ever diminishing quantity. Developing countries have been particularly affected by the reduction in United States imports. For example in 1970, some 59 percent of Argentina's total exports went to the United States, 54 percent of Brazil's exports and 100 percent of Philippine exports; in 1984 the percentages were 51 percent, 9 percent and 33 percent.

The developed market, where trade has increased significantly is the USSR, where substantial imports have been drawn from the free market in addition to those from Cuba under prevailing special arrangements. But a major factor in this development has been poor production in the USSR. Imports into the Soviet Union declined significantly in 1985 when there was a good domestic crop so that the Russian market cannot be taken for granted. Furthermore, while cane sugar suppliers have benefited, domestic production shortfalls have been in beet sugar output so that a good share of free market imports have come from white sugar suppliers, namely the EEC.

In 1984 and 1985 there was no growth in world trade despite the “rock-bottom” prices at which sugar could be obtained. This reflected most of the factors already referred to, foreign exchange difficulties of low income developing countries, the continuing drive towards self-sufficiency in many developing countries and further inroads of competitive alternative sweeteners.

It is not the purpose of this paper to review the various international sugar agreements which have attempted to stabilize the world free market for sugar since that has been done in many publications and reports including the FAO 1985 ESD paper on “Sugar: Major Trade and Stabilization Issues in the Eighties”. It is sufficient to say that the 1977 Agreement failed because it lacked the effective supply control measures necessary to support the price range and one major exporter, the EEC was outside it. Exporting countries which had over-reached to the short-lived price surge of 1974/75 again overreached to the ever shorter upsurge of 1980–81 and the result was a massive build-up of exportable surpluses and stocks which led to the disastrous price situation which has prevailed since 1982. The modest recovery which occurred in the second quarter of this year was caused by some improvement in the overall supply demand balance during the present 1985/86 crop year but there are indications that a larger crop could be forthcoming in 1986–87. There were even some early danger signals that the somewhat higher prices of around 7 cents per lb might be causing some producers to think about ressurecting longer term expansion programmes and on the other, that developing importing countries might react adversely to the higher prices.

Medium-term outlook

In a recent review for the world sugar economy, FAO projected production consumption and trade in the medium-term up to 1990. In brief, the projections were based on individual country regressions of historical per caput sugar consumption with income and the deflated retail price of sugar as the explanatory variables. From a base period of 1979–81, sugar consumption in 1990 was projected using specific assumptions about growth rates of income, retail prices and population. Projected consumption was then adjusted to take account of estimated growth in consumption of alternative sweeteners on the assumption that current national policies governing output of alternatives will not change and more importantly, policies which protect domestic sugar output (particularly in the United States and Japan) and which are advantageous to alternative sweeteners, will not change in substance. It was assumed that given the existing factory capacity to process cane and beet and the present proven agricultural capacity to grow both cane and beet, production would be sufficient to meet any projected level of demand. However, in projecting production, domestic consumption requirements, national programmes and policies economic trends and forecasts - both national and global were taken into account. Furthermore for major exporting countries and regions it was assumed that policies would be adjusted to match production to domestic consumption plus export requirements. The results are summarized in Table 4 - World sugar production, consumption and net trade, 1979–81, 1983 and 1990.

Production was projected at around 110 million tons and consumption at 107–110 million tons on differing price assumptions (constant and 10 percent decline on base period). Given the fact that non-caloric consumption, notably aspartame, has risen much more rapidly than the projections envisaged, it may be wiser to adopt the lower assumption projections but on the other hand, on the assumption of economic recovery in developing countries, demand for sugar could expand much more rapidly than projected. The projections clearly implied that many of the basic issues highlighted in the preceding review would continue, that there would be a notable absence of growth in import demand; the decline in developed country imports would continue and only limited growth would occur in imports into developing countries.

It should be stressed however, that the income assumptions used in the projections were realistically low and indeed even if the economic recovery now being predicted does occur, it will take time to filter through to developing countries. But assuming that a recovery does take place and higher income growth is realized between 1990 and 2000, sugar consumption in developing countries will again resume its strong upward trend. Unless developing importing countries were to increase their combined production levels very substantially between 1990 and 2000 (having already increased them by more than 20 percent between 1980 and 1990), there will be a further growth in developing country imports between 1990 and 2000. A very simple attempt to quantify such growth based on an extrapolation of the 1990 projections indicates that imports into developing countries could rise by between 3 and 5 million tons in the decade between 1990 and 2000. Regarding developed countries it must be stressed that even in the next decade no further growth may be expected in import demand.

The question arises as to how cane sugar exporters and developing country exporters in particular can gain a larger share of the consumption growth that must take place in developing importing countries in the years ahead. Why, for instance, do developing countries establish high-cost sugar industries when it is undoubtedly cheaper to import? One factor has almost certainly been the instability of world sugar prices. Developing importing countries need to be convinced that it is cheaper on a long-term basis to import sugar from other developing country exporters and this implies a guarantee of stable prices and stable deliveries. Some assurance of price stability through long-term contracts for example, might encourage an increase in imports even in the content of balance of payments problems and long-term growth. Above all, it might discourage uneconomic investment projects sponsored by promoters who can always find in the recent past a high price period which would have had serious balance of payment effects on a large importer, or is able to construct an “average” which appears to justify the investment.

Most developing importing countries lack the refineries needed to convert raw sugar to white for final consumption and therefore it is easier to import white sugar if the price is right. In these circumstances, the EEC by entering the market as a “low price” exporter of white sugar was able to make enormous inroads and sell more than 3 million tons a year to developing countries. Some developing countries including Brazil and Cuba have become significant white sugar exporters and India has traditionally exported white sugar. There are of course costs and problems involved in particular in shipping white sugar but developing exporters of raw sugar world be advised to consider the possibility of increasing their output of white sugar for export. Another alternative could of course be to enter into joint ventures with developing importing countries to refine raw sugar in the country of destination or even to develop refining capacity in a third country, centrally located in the consuming area (e.g. Korea and Malaysia). Such initiatives would be costly but far less so than setting up new sugar industries in importing countries.

A recent survey by the International Sugar Organization reveals that developing countries apply much higher import duties on sugar than developed countries and contrary to developed countries, apply higher duties on raw sugar imports than on white. In the current climate of balance of payment difficulties it may be inopportune to expect developing importing countries to envisage imports by reducing tariffs but there is clearly scope in the future for preferential tariff concessions for developing country sugar exporters.

These are but a few suggestions which developing country sugar exporters may find of interest. The outlook may not be bright but nor is it without hope. There is a future for sugar but it would be naive to assume that the tendency to produce quantities surplus to market requirements will not persist. It will remain necessary to continue to monitor and regulate production for export. To this end full support should be given to efforts to conclude an effective International Sugar Agreement in which exporting countries agree to discipline their exports and importing countries agree to support such efforts in return for guaranteed supplies at stable and reasonable prices.

Developing countries are well aware of the limitations on producing sugar surplus to market requirements and this consultation is proof of the fact - faced with the realities of the sugar market - sugar cane farmers and millers need alternative outlets. Ethanol is perhaps the best known as is the Brazilian experience where more than 50 million tons of cane, equivalent to 9 million tons of sugar per year are utilized to produce alcohol. A recent report indicates that if no further sugar had been diverted to ethanol production, actual world ending stocks of sugar would have been larger last year by corresponding amounts which might have resulted in world sugar prices being even lower than they have been. But in the case of Brazil, the decision to produce ethanol was taken independently, although of course linked to the depressed outlook for sugar. In other words the cane was planted specifically to produce ethanol. To divert surplus cane to a viable alternative use is indeed highly desirable. To produce additional cane in a surplus situation may well be another matter.

But it is not the scope of this paper to deal with such questions. The next two speakers are examining alternative uses of sugar cane and of course the main agenda item is the examination of prospects for the utilization of sugar cane for animal feed. I assume that in the discussion of these items, due consideration will be given to the economics involved.

Figure 1 - WORLD SUGAR PRICES, CURRENT AND REAL (1982 = 100): 1960 – 1985

Figure 1
Table 1: Production, exports and relative shares of sugar
 Developing countriesDeveloped countriesWorld
thousand tons
Beet6 9207 8598 60535 37937 02436 61942 29944 88345 224
Cane50 03548 76347 1075 4786 3215 42155 51355 08452 528
Total56 95556 62255 71240 85743 34542 04097 81299 96797 752
Relative share
thousand tons
Beet1703044597 6426 5767 9927 8126 8808 451
Cane18 88019 15115 9603 2673 6633 63722 14722 81419 597
Total19 05019 45516 41910 90910 23911 62929 95929 69428 048
Relative share

Source: Licht, F.O.: International Sugar Report (World Sugar Balances — 22 May 1986).

Table 2 - Production, consumption, trade, stocks and prices of sugar, 1960 to 1985
Calendar YearProductionConsumptionClosing StocksTotal tradeWorld free market
thousand tons raw valueUS ¢/lbUS ¢/lb 1982=100
196052 29949 21821 40019 32419 12111 50011 2003.9010.09
196154 75753 22921 30022 40121 98812 00011 8002.708.84
196251 22753 45523 85118 52918 29711 67111 5172.789.11
196351 89454 34320 86716 86916 62111 72711 4878.2926.84
196459 31954 15824 56416 82616 31611 37911 0185.7218.16
196563 79057 96228 22618 64918 12012 20811 8352.036.29
196662 74159 75429 35518 23515 23112 34012 3401.765.47
196765 02661 60231 39520 19719 62213 76113 1431.875.80
196865 41164 74431 03020 58919 22514 30612 9871.855.74
196968 14066 84732 34518 57118 76912 98913 2953.209.29
197071 14270 48031 58621 80821 33914 03513 6563.6810.08
197171 97572 45730 64421 03520 64414 53414 2504.5011.68
197273 73573 66030 10921 87121 23416 65715 9997.2717.36
197375 78976 33029 34322 47822 42716 54416 6229.4519.16
197476 39777 30327 89522 09721 51916 24015 71129.6649.32
197578 84674 43832 06520 59920 49513 35113 49620.3730.15
197682 40079 24134 25122 79421 78315 54914 68211.5117.04
197790 35082 59240 61528 47126 86920 76019 4048.1011.00
197890 83286 14844 73425 07224 80717 49017 2977.819.24
197989 32789 99842 99225 98525 05218 27017 7319.659.90
198084 51488 16439 31126 83226 75519 41819 51028.6927.16
198192 52288 40641 13429 12228 24220 62819 86216.8316.66
1982101 43291 72548 80330 41729 33821 63620 7128.358.35
198396 91293 50849 07128 84327 53020 53219 5248.468.79
198499 20096 21351 67328 43427 93719 21018 8355.205.59
198598 90097 10053 40026 60026 20018 60018 2004.064.40

Source: International Sugar Organization (ISO).

Table 3: US consumption of sugar and other sweeteners 1970 and 1980–85
 thousand tons
Sugar (raw value)10 5479 3308 8608 3108 0857 7567 271
HFCS (dry basis, sugar equivalent)-1 9802 6002 8103 2663 9014 716
Other caloric sweeteners(glucose-dextrose)1 6162 1762 2212 2682 2862 3042 331
Total caloric sweeteners12 16313 48613 68113 38813 63713 96114 318
Non-caloric or low calorie sweeteners       
Aspartame--211053726221 194
Saccharin6207968358861 0111 074651
Total of non-calorie and low calorie sweeteners6207968569911 3831 6961 845

Source: USDA — Outlook and Situation Report (Sugar and Sweetener), March 1986.

Table 4 World sugar production, consumption and net trade: 1979–81, 1983 and 1990
   million tons
1.World total  12
 iii)Total net imports323.323.621.922.8
2.Developed countries    
 iii)Total net imports 313.313.110.811.1
3.Developing countries    
 iii)Total net imports 310.010.511.111.7

1 Based on assumption of constant prices.
2 Based on assumption of 10 percent reduction in prices from base period.
3 Figures derived on the basis of imports minus exports for individualsugar importing countries.

Source: FAO.

Table 5: Value of agricultural exports, including fishery and forestry products
 million US $
Sugar, beverage and tropical products26 83229 5194 1474 28922 68525 230
of which:      
Sugar10 82010 1162 7122 4988 1087 618
Coffee9 14510 5353034218 84210 114
Cereals35 77437 45329 74231 6146 0325 839
Livestock products36 70334 84131 84430 2494 8594 592
Raw materials12 65813 7495 8466 6826 8137 067
Fishery products15 72115 9868 9688 8816 7527 105
Forestry products47 68550 93140 15243 3207 5337 612
Others96 771102 92570 61372 67326 15830 251
GRAND TOTAL272 144285 404191 312197 70880 83287 696

Source: FAO (CRO 1985/86)

Table 6: EEC production and exports of sugar: 1975 to 1984
 ProductionTotal ExportsOf which to developing countriesAnnual average1 white sugar prices
 thousand tons raw valueUS ¢ per lb
197510 81870245525.3
197712 7522 7501 9179.5
197913 6133 6212 93511.7
198115 4765 4143 98420.4
198215 5155 6153 84811.3
198312 3054 9103 49911.4
198413 2714 3933 1087.7

1 Paris Market.
Source: FAO (ECDC study)

Table 7: US imports of sugar 1970–80–84–85
 thousand tons raw value
Total imports4 7584 0503 0042 273
of which from developing countries
share of developing countries
4 4013 6012 6282 082
in total imports (%)92898792

Principal developing country suppliers to the USA and their dependence on the US
 1970% Dependence1980% Dependence1984% Dependence
 thousand tons
Dominican Republic659835206648469
Philippines1 1781003482437833

Source: FAO (ECDC study)

Table 8: USSR imports of sugar, 1970, 1980 and 1984
 thousand tons raw value
Total imports3 1074 9645 505
of which special arrangement3 1052 7263 650
free market22 2381 855
of which developing01 270811
Re-exports1 484164204

Source: FAO (ECDC study)

K. S. Mulherin

En este trabajo se examinan las tendencias de la producción, el consumo, el comercio y los precios del azúcar en los últimos 25 años y se evalúan las perspectivas a plazo medio hasta 1990. Se observa que la oferta y la demanda han experimentado fuertes y constantes desequilibrios, lo cual se ha traducido en precios sumamente variables en los mercados mundiales. Esto ha tenido repercusiones desfavorables en los ingresos agrícolas y de exportación en muchos países, especialmente en los países en desarrollo, que dependen en gran medida de las exportaciones de azúcar. Además, el mercado mundial del azúcar ha experimentado un cambio estructural fundamental desde mediados del decenio de 1970, debido en parte a un menor aumento de los ingresos tanto en los países en desarrollo como en los desarrollados y a cambios en los hábitos alimentarios, lo cual se ha acentuado por el desarrollo de sucedáneos. Las proyecciones a plazo medio de la producción, el consumo y el comercio de azúcar indican que las importaciones sólo crecerán en los países en desarrollo y seguirá siendo necesario controlar y regular la producción para la exportación. Algunos productores de azúcar, especialmente los productores de caña de los países en desarrollo, necesitan sin duda nuevos mercados, de ahí que deba fomentarse vivamente la búsqueda de nuevos usos para la caña que sean económicamente viables.

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