TIME FOR A Regional Market for Caribbean WHITE Sugar
It may surprise Caribbean consumers to know that currently the lemonade or cola that you drink is nearly always made with sugar shipped from Guatemala, Brazil, Colombia or Mexico rather than locally produced sugar in the Caribbean.
The reasons for this are historical, and a result of longstanding preferential trade agreements with the EU, that provided regional producers with a guaranteed high market price for raw cane sugar.
These preferential arrangements came to an end in October 2017, leading to an increase in European production of beet sugar, and leaving Caribbean producers to sell their sugar at world market prices- a situation not faced by any other sugar producer worldwide.
SAC is campaigning for a change in the trade rules for CARICOM Governments to adopt as soon as possible the same approach as every other sugar producing region on the planet, thereby creating the right market conditions for a sustainable and successful future for the Caribbean sugar industry.
The solution SAC is putting forwards to CARICOM and regional governments is to strengthen the regional market for Caribbean white sugar by enforcing the Common External Tariff on imported white sugar. This would allow investment in production to proceed and allow regional producers to focus on supplying the needs of their natural customers - manufacturers of products like lemonade and cola in the region who are the most significant buyers of white sugar.
the vagaries of the world market
Around the world, sugar producers supply their local markets first. Governments encourage this by placing tariffs on imported sugar from overseas. Local producers then sell any excess sugar that they can’t sell locally on the world market.
Because sugar on the world market is “excess”, the price varies hugely depending on global demand and supply.
Without any barriers to this cheap world market sugar entering the market, it becomes uneconomic to invest in regional production of the higher value sugars - at present, the most expensive to produce highly refined sugars are often available in CARICOM even more cheaply than unrefined raw sugar.
Selling Caribbean sugar on the world market year-on-year for CARICOM producers is simply not an option, with a highly volatile commodity price and volumes of sugar being sold on the world market being sold even below the production cost of the lowest-cost producers such as Brazil.
CARICOM manufacturers are faced with huge uncertainty over the price they will pay for world market sugar. Some years, it has been well over double the price.
The world market is not reliable for either producers or buyers.
CARICOM market reform is a win-win
A robust regional market would offer security of supply and certainty of pricing over the long-term for both buyers and suppliers.
In this win-win scenario, sugar producers will be protected from going out of business during periods when the world sugar price is extremely low; and industrial users will be protected from extreme price hikes when the world sugar price is extremely high.
Likewise, governments will save precious foreign exchange for other areas of the economy, and reduce their balance of trade deficits.
In turn, this will encourage sugar producers to invest and expand – bringing to the region new jobs, investment in high-value activity, and additional income to spend in our communities.
producers are ready to invest
The sugar industry is ready to invest and has already advanced plans to adapt its existing production capacity to meet the regional demands for white sugar, with an estimated 290,000 tonnes of plantation white sugar produced annually by 2020 across the region. This will be more than sufficient to meet the requirements of the current regional market for white sugar.
caribbean industry at a crossroads
The sugar industry, together with Governments from across CARICOM today, faces a binary choice:
- Enforce a robust regional domestic market in CARICOM for regional sugar which will allow the industry to upgrade and invest in new capacity to produce sugar as required by regional industrial users more efficiently, at fair prices, securing the place of Caribbean sugar in Caribbean products;
OR
- Risk closure of the industry, with all regional sugar and molasses imported into the region at volatile global prices, a significantly weakened CARICOM single market and considerable unemployment across the region.
CARICOM and Caribbean governments have an opportunity to enable the region to retain and enhance a vibrant CARICOM agricultural industry, and to demonstrate how the CSME can create the right environment for small individual Caribbean industries to be viable in a way in which national support alone cannot.
For more detailed information on how SAC is working with regional producers, manufacturers, governments and other stakeholders to create a sustainable future for the Caribbean sugar industry, please visit our Policy Papers and Resources page.