Most countries intervene in the sugar market. This state intervention leads to difference in prices. Among all of the countries, the European Union has the highest prices with the United States not far behind. The United States’ domestic market is protected by import levies due to the national sugar deficit. South Africa, Poland, and Thailand have domestic prices that are relatively strongly subsidized. India also has a strong intervention in the sugar market in order to protect the poor sector of the population and sugar cane growers. India has fairly high minimum wholesale prices for sugar cane and refined sugar. The sugar factories are also ordered to sell a third if their sugar production back to the state at a price that is almost the price of production. Australia practices liberalization of the sugar market; the State Marketing Board controls all sugar marketing for sales and exports. The sugar market in Brazil is run by individual sugar producers. The only protection for domestic prices is a 2% import duty. The alcohol market plays a major role in determining sugar prices since almost half of the sugar produced in Brazil is used to make alcohol. (1)
Some countries learnt from history. Nowadays, they know that sugar is a valuable commodity for everybody and try to protect their own economy from “the interventionist traditions in the industry” that were established long ago. For example, The USA has a sugar’ domestic price higher than the world price and regulates the imports of sugar. “The European Union protects its beet-sugar growers.” Additionally, India regulates production and domestic prices (2).
The graph shows an example of government’s regulations on price of sugar. The difference in the price of sugar between the world and the USA is determined by The USA government. This is due to governmental regulations to protect its market from global intrusion. From: (3)
Price Arrangements for Sugar in the United States (3)
There are three main price arrangements under the US farm program act that support domestic prices for sugar above the average world market prices.
1) Flexible Market Allotments: shares of sugar meant for human consumption sold by domestic processors of beet and sugar cane are allocated to processors on a basis of prescribed rules. The government sets the allotment based on the conditions that the processors have at least an 85% share of the market for human consumption and that the sugar prices remain above loan rate levels.
- 54% to refined beet sugar
- 46% to raw cane sugar
3) Tariff rate quotas for raw and refined sugar: These are set by the US Secretary of Agriculture at the beginning of the fiscal year. The minimum levels for import quotes, set by the World Trade Organization, are around 1.139 million tonnes and 22,000 tonnes. The Secretary has power to increase the quotas in case the supplies of sugar are unable to meet domestic demands ar reasonable prices.
(1) “Sugarbeet vs. Sugarcane.” Agrocourier.com. Web. 21 Mar. 2012. <http://www.bayercropscience.com/BAYER/CropScience/cscms.nsf/id/Sugarbeet_Agro?Open>.
(2) “The Cambridge World History of Food – Sugar.” Web. 21 Apr. 2012. <http://www.cambridge.org/us/books/kiple/sugar.htm>.
(3) “Australian Commodities: March Quarter 2011.” Australian Government; Department of Agriculture, Fisher and Forestry. Web. 21 Feb. 2012. <http://adl.brs.gov.au/anrdl/metadata_files/pe_abares99001790_12a.xml>.