The historic volatility of sugar prices matches the spiky history of the commodity. Once reserved for the rich, and equal in value to musk, pearls and spices, today this kitchen staple can be vilified by health enthusiasts just as it is embraced by top chefs. And it has recently found new supporters and detractors because of its role in making biofuels.
Sugar is certainly one of the most policy-distorted of all agricultural commodities, with high levels of protection of national sugar industries in OECD countries dating from the 1950s. So in 2005, when EU ministers agreed to radically reform the Common Market Organisation for sugar, there were mixed reactions from the industry, notably in Europe. The EU is currently the world’s third largest sugar producer, after Brazil and India, and ranks second in sugar consumption just after India. Three major producers–France, Germany and Poland–collectively account for more than half of the EU’s sugar output.
Sugar might not be the most expensive item in a shopping basket, but by maintaining high tariffs on imports, sugar subsidies have jacked the price in these countries up to three times the international market price. This ratchets up prices of other food produce as well. The EU reform will cut domestic support prices by 36%, from 631.9 per tonne today to 404.4 per tonne by 2010. It also calls for reduced quotas and a voluntary restructuring scheme that has already resulted in consolidation and closures of some of the EU’s surplus sugar producers and sugar beet growers. Rory J. Clarke, Alison Benney