Brussels, June 9, 2005

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THE FUNCTIONING OF

THE INTERNATIONAL

SUGAR MARKET

Jean-François Sneessens

Conference “What reform for a mutually supportive sugar regime?”

Brussels, June 9, 2005

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I. Production, Consumption,…

II. International market:imperfect and insufficient

mechanism of co-ordination

III. Possibilities of action

IV. Other observations

Brussels, June 9, 2005

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World Sugar Production

0

20

40

60

80

100

120

140

160

180

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2002

mill

ion

s t

sucre de betterave sucre de canne total

Brussels, June 9, 2005

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World Sugar Consumption

Brussels, June 9, 2005

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Production et consommation de sucre (2002/2003)

0 5 10 15 20 25 30

Australie

Mexique

USA

Thaïlande

Chine

UE 15

Inde

Brésil

en million t équivalent sucre brut

Most important producers and consumers

Brussels, June 9, 2005

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World market

21%

Preferential markets

7%

Self-sufficiency

72%

Sugar Production and Trade

Brussels, June 9, 2005

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Brussels, June 9, 2005

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Most important export and world prices

0

4000

8000

12000

16000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Exportations nettes (000 mt)

0

80

160

240

320Prix ($ par mt)

Brésil UE Thaïlande Australie Prix mondial du sucre

Brussels, June 9, 2005

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PRODUCTION / CONSUMPTION:

CO-ORDINATION THROUGH

M A R K E T S

(supply/demand, prices)

b u t . . .

Brussels, June 9, 2005

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World markets are

imperfect

VOLATILITY

LOW LEVEL, on average

DOWNWARD TREND

<== Measurable

<== . Theory (Ricardo) . The average world cost:

400 EUR/t sugar? . 80 % producers, cost > world price

<== Measurable

PS : is so for sugar and other agricultural products

World prices :

Brussels, June 9, 2005

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World markets particularly imperfect:

WHY ?

1. Particularities agricultural Supply & Demand(non-elasticity,…)

2. Mercantilist national policies (non-co-operative => anti-co-operative)

2bis Priority given to Exports

3. Intrinsic factors to world marketsa) Residual markets

b) Income inequalities

4. Currency,...

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EXPECTATIONS OF THE SOCIETY AND AGRICULTURAL MARKETS

Expectations (towards agric.) : Food security,Social balance,Environment…

Particularities : Equity and Externalities==> outside of the market!

Market : IMPERFECT mechanism of co-ordination

Complementary role of the government (where?… national)

Brussels, June 9, 2005

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Conclusion for the world markets:

important mechanism of co-ordination

but

IMPERFECT AND INCOMPLETE

(to respect, to improve, to complete)

Brussels, June 9, 2005

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Possibilities for action ? :

• NON –mutually supportive policies (dumping)

• National regulation*

• National regulation + preferential import (condition: coherence with regulation)

• International and co-operated policies (co-operated actions, international agreement,…)

* Prices, supply regulation

Brussels, June 9, 2005

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Other observations:other sweeteners

Glucose5%

Saccharine4%

Isoglucose3%

Sucre88%

1980

Aspartame2%

Glucose5%

Saccharine6%

Isoglucose7%

Sucre80%

2000

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Other market possibilities:

bioethanol

Brazil: > 40 % of the cane sugar area !

+ Investments

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Bioethanol and Biodiesel Production(in million tonnes)

01

23

45

67

89

1011

12

UE-25 USA Brésil USA BrésilUE-25

Bioéthanol Biodiesel