Brownsugarexporter.com - World sugar trade, either sugar cane or
sugar beet, are always marred by price volatility due to the continuous
imbalance of demand and supply. The turbulence source is sugar problems facing
each country consumers and producers of sugar, both developed and developing
countries.
Sugar is
one of the essential food commodities consumed by all countries in the world.
But not all countries produce sugar so there is always the countries fully
dependent on imports. In addition, all states have always sought sufficient
supply of sugar in the country so that the sugar industry is the most regulated
industry and overseen by the respective governments.
Almost all
sugar producing countries in the world have always sought the protection of the
local sugar industry, for example by providing covert subsidies and import protection.
Setting the price of sugar is also done through bilateral and regional
agreements. Many developing countries rely on the export of sugar as the main
foreign exchange earner so always exported despite falling prices. Developed
countries like the United States and the European Union also apply policy to
protect its sugar industry. As a result, sugar traded in the world market is
only around 30% -35% of world production and prices in the free market is not
always proportional to the cost of production, could be lower and could be
higher.
The use of
sugarcane ethanol as a vehicle fuel cause the world sugar price is also
influenced by the price of oil in the world market. Though the price of oil is
not only influenced by the state of the world interconnected economy but also
by geopolitical arena. May be added that the option to purchase sugar from a
country also affected by the exchange rate between currencies and
transportation costs of sugar. In 2008, the surge in world oil prices has led
to an increase of 22% in world sugar prices.
Graph sugar
price volatility 1989 - 2010
In the
picture above looks volatile price developments that characterize the dynamics
of the world sugar price. Price volatility is not only caused by the balance of
production and consumption but also due to the involvement of other factors.
First it should be noted that world sugar prices do not always reflect the
proportion of the cost of production. In many countries who throw the sugar to
the world market, including the European Union, the United States and India, the
sugar industry enjoys protection or subsidies from the government. In case of
surplus production, sugar sold at subsidized prices so as to reduce the market
price. Second, the government generally always put sugar sufficiency in the
country. In case there is excess sugar exports whereas the immediate shortfall
if the immediate import. There are also special penjanjian preferences such
agreements where sugar prices are set based on bilateral and regional
agreements. This leads to a relatively small volume of sugar that is traded on
the world market when compared to production and consumption in the range of
30-percent rate alone. (BD)
