Changes and Liberalization in the Sugar Industry

The sugar industry could be seeing big changes in the coming years, jump started when the European Union announced a liberalization of their sugar policies. The new sugar policy will allow farmers to produce more sugar, as production quotas and minimum payments have been abolished. With the new rules, the EU expects to become a net exporter of sugar for the first time since 2005, which will impact sugar farmers internationally, especially those used to importing to Europe.

Currently, many Caribbean countries ship sugar to Europe, but when the quotas are abolished in 2017, the European market could dry up. Forecast predict Europe will import a lot less sugar after 2017, worrying sugar cane producers in the Caribbean. Also, as Europe begins to export their sugar, markets in the Middle East and Northern Africa could experience disruptions. Competition in these markets will increase, possibly bringing a reduction in prices, and reduced revenue for farmers. For Europeans, the ending of the quotas will help bring sugar prices in the EU closer to the international market. The prices are not expected to reach market levels though, as import restrictions remain in place, leading analysts to predict EU sugar prices to remain 15-30% higher than international prices.

Internationally, Europe’s new policies could lead to liberalization across the board. Many African countries have been pressured by COMESA to promote free trade in the sugar market, while Brazil has brought a case against Thailand to the WTO over sugar subsidies. For consumers, the liberalization of sugar policies and quotas could be beneficial, especially if competition helps drive down the price of sugar. In the coming years, look for countries to work hard to protect their market share, especially as the sugar market becomes more and more saturated.