USDA review of the Brazilian sugar sector
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CTA. 2003. USDA review of the Brazilian sugar sector. Agritrade, December 2003. CTA, Wageningen, The Netherlands.
Permanent link to this item: http://hdl.handle.net/10568/52836
In October 2003 the USDA released a profile of the Brazilian...
In October 2003 the USDA released a profile of the Brazilian sugar sector, noting that: Brazil is one of the most cost-efficient producers of sugar (costs of 5 to 5.5 US cents per lb in the centre-south region) making it the world's leading sugar exporter; sugar accounts for 2% of Brazil's GNP, 17% of agricultural production; and provides employment to over 1 million people. Overall the sugar sector provides better returns to farmers than other crops. In the 1990s Brazil liberalised the sugar sector. This resulted in a winnowing out of inefficient producers and structural restructuring and consolidation. It also saw a doubling of Brazilian sugar production. Brazil no longer directly subsidises the production of sugar. Brazilian sugar production however is unpredictable. 2000 and 2001 saw low levels of production, while 2002 and 2003 saw record harvests. Brazil is also one of the world's largest consumers of sugar with capita consumption growing from 49.9 kg per capita in 1991 to 57 kg per capita by the end of the decade. Some 45% of sugar consumption in Brazil is via value-added food products (compared to 70% in the EU and 30% in southern Africa). Brazil exports between 45% and 55% of its sugar production, averaging 13.3 million tonnes in the last three years (the second largest exporter, the EU, is reported by USDA as exporting about 6 million tonnes). Brazil exports raw sugar, mainly to Russia, Egypt, Iran and the United Arab Emirates and refined sugar to Egypt, Nigeria, India, Sri Lanka and Yemen. The paper notes the links between Brazilian sugar exports and the use of sugar to produce ethanol as a additive to petrol for motor vehicles, with currently a 50/50 split, although it appears to be being used increasingly for the manufacture of sugar. The ratio of usage however varies according to a complex set of factors including: the world oil price and the international sugar price; currency exchange rates the efficiency of producing sugar and ethanol. The introduction of new flex-fuel engines (which can run on both oil and ethanol) could increase market uncertainties. The increased popularity of flex-fuel cars and high oil prices could theoretically result in all of Brazil's current sugar production being used to power a fleet of 5 million cars. Alternatively, low oil prices could lead to Brazilian sugar production swamping the world market. Comment: It should be noted that while the EU complains about the growing level of Brazilian sugar exports this is based on the low cost of sugar production in Brazil. In contrast the EU is a major sugar exporter despite its exceptionally high average production costs. The USDA report shows Brazil as already established as a supplier to Middle East and north African markets, those which could be most affected by EU sugar-sector reform, and where new opportunities could emerge as EU sugar exports contract. This suggest that new market opportunities for African ACP sugar suppliers in these markets could be limited by the trade relationships which Brazil has already established. The volatility of Brazilian production and the unpredictability of Brazilian supplies of sugar onto the world market will be a major factor in EU sugar-sector reform.