The World’s Sweet Tooth Has a Few Cavities – International Trading, Lobbyists, and How Commodity Futures Affect The International Sugar Industry

In today’s mostly post-colonial world, sugar cane farming, and its byproducts, has become one of the foundations for local, rural economies in the tropical countries now independent of their controlling states. This foundation rests on financial ground still controlled by foreigners, ground eroded by fluctuating international sugar prices, tariffs, and subsidies. The countries that have spent decades ramping up production to satisfy the not just their own country’s but also the world’s demands have been left struggling to move stock from previous years productions as they begin the current year’s harvest. With the increasing need for sugar cane for consumption, and as an alternative energy source ingredient for ethanol, how has such a surplus occurred? And how has the world of international finance significantly impacted economies across the real world?

Sugar has been traded internationally in New York since 1914, with options on sugar futures made available in 1982. It is a “commodity”, as are other raw materials, metals, and agricultural products such as oil, gold, copper, cattle, cocoa, coffee and salt. Commodities are traded in the same way as stocks and bonds, but what is traded for in commodities is actual, tangible assets, not just financial, paper based assets. Commodities are also traded as futures, so investors in commodities futures are betting that the prices they are buying assets for will change in their favor before the product is ready to ship. Theoretically, the higher a demand for a tangible product the higher the prices for the product become across the board. In reality, however, different systems have been set up to impact international prices in order to give investors and domestic production good returns, i.e. put money in their pockets. Individual governments such as the U.S.A. and the United Kingdom have set up subsidies for domestic production to assist farmers in getting premium prices, and the U.S. Commodities Market trades domestic sugar under a completely different identifier as international sugar. U.S. subsidized sugar is identified as Sugar No. 16, and has traded 35-50% higher than international sugar, Sugar No. 11.

Sugar No. 11, International Sugar Prices for 10 years prior to March 13, 2015.
Sugar No. 11, International Sugar Prices for 10 years prior to March 13, 2015.

Sugar prices are also valued in U.S. Dollars, and are affected by fluctuations in international currency valuations and other commodities costs, especially petroleum prices which affect not only transportation costs but the demand for sugar cane for ethanol production. Falling prices for international sugar have led to the creation of lobbying entities such as the International Sugar Trade Coalition (ISTC), made up of representatives of  17 countries’ sugar associations, manufacturers and authorities who supply about 46% of the U.S. sugar imports.  The ISTC has lobbied numerous times with the US Government to ensure that programs that improved chances for ISTC’s members to export sugar to the U.S. such as the 2007 Farm Bill are renewed from year to year.  For countries left out of entities like the ISTC, like India, sugar cane  farmers are left with local associations lobbying their own government first for subsidies, than for increases in subsidies.

As the supply and demand of sugar changes internationally, it is clear that the now independent countries once under the control of colonizers are still subject to financial restraints that are out of their control. With that much money involved on a global scale, how can a single individual ensure that their own consumption is responsibly sourced?

Works Cited:

Bhardwaj, Mayank; Reuters; “Mills seek government incentives to export white sugar”; Reuters.com; 13 March 2015; Web; Accessed 13 March 2015; <http://in.reuters.com/article/2015/03/13/india-sugar-exports-idINKBN0M90SG20150313>.

Hecht, Andrew; “Sugar: The Sweet but Volatile Commodity given away free in restaurants”; About.com; Undated; Web; Accessed 13 March 2015; <http://commodities.about.com/od/Soft-Commodities/fl/Sugar.htm>

Kowalski, Chuck; “Sugar Futures Profile”; About.com; Undated; Web; Accessed 13 March 2015; <http://commodities.about.com/od/profilesofcommodities/p/sugar_futures.htm>.

Kowalski, Chuck; “The Two Sugar Markets – US Sugar and World Sugar”; About.com; Undated; Web; Accessed 13 March 2015; <http://commodities.about.com/od/researchcommodities/a/The-Two-Sugar-Markets-Us-Sugar-And-World-Sugar.htm>.

Mintz, Sidney W. Sweetness and Power: The Place of Sugar in Modern History. New York: Penguin, 1985. Print.

IntercontinentalExchange (ICE) Futures U.S.; “ICE Sugar Brochure” Theice.com; 2012; Web; <https://www.theice.com/publicdocs/ICE_Sugar_Brochure.pdf>

Images

Sugar #11, International Sugar prices March 13, 2015 http://www.nasdaq.com/markets/sugar.aspx?timeframe=10y

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