Sugar Commodities Project Chee Hong and Jerome

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Sugar Commodities Project

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Sugar Commodities Project Chee Hong and Jerome

  1. 1. Jerome Sugar Jerome Chee Hong Chee Hong
  2. 2. History of the trading of the product <ul><li>Among the most widely produced and broadly supported of all agricultural commodities in the world. </li></ul><ul><li>Price is affected by a wide range of factors. </li></ul><ul><li>3/4 of the world supply of sugar is produced from Sugarcane. </li></ul><ul><li>Before 1990, sugar beets represented 40 percent of world sugar production but its share of world production has fallen during this period because of the lower relative cost of cane sugar Production. </li></ul>
  3. 3. The World Sugar Market – The Major Players <ul><li>World sugar production and consumption is around 140 million metric tons per year. </li></ul><ul><li>Brazil is the largest sugar producer in the world. </li></ul><ul><li>In the 2004-05 season, Brazil produced 28.15 million metric tons </li></ul><ul><li>and it represents nearly 20 percent of total global sugar production and is truly the giant in the world sugar industry. </li></ul>
  4. 4. Brazil- What has it done for us? <ul><li>Brazil’s massive sugar production and exports has placed downward pressure on world sugar prices. </li></ul><ul><li>As a result, the generous terms of the EU sugar protocol have been the target of continued legal challenges from Brazil and other major sugar exporting nations. </li></ul>
  5. 5. Producers <ul><li>Main Sugar Companies (distributor) </li></ul><ul><li>Raw producers - Small scale farmers in Brazil joining </li></ul><ul><li>Bariri Sugarcane Suppliers Association, the largest sugar cane producer in the world. </li></ul><ul><li>Traded at the Chicago Mercantile Exchange </li></ul>
  6. 6. What Goods are made from Sugar?
  7. 7. The Price History of Sugar
  8. 10. Conditions responsible for large fluctuations in price. <ul><li>Natural disasters such as droughts, hurricanes . </li></ul><ul><li>Appreciating currencies. </li></ul><ul><li>short-term inflexibility of the supply response to price changes. </li></ul>
  9. 11. Conditions responsible for large fluctuations in price. <ul><li>Subsidies and High Tariffs </li></ul><ul><li>short-term rigidity of the supply response to price changes </li></ul>
  10. 12. Industry Groups / Trade Agreements
  11. 13. North American Free Trade Agreement (NAFTA)
  12. 14. NAFTA <ul><li>In the agreement, net surplus producer of sweeteners was defined in the following manner: </li></ul><ul><li>Mexico’s sugar production must exceed its consumption of sugar plus its consumption of other sweeteners If Mexico did not attain net surplus producer of sweeteners status, then its share of the U.S. sugar quota would be 7,258 MT. </li></ul>
  13. 15. Supply Demand Table
  14. 16. Supply Demand Table <ul><li>First, sugar consumption in Mexico continues to expand. </li></ul><ul><li>Second, note the pattern of HFCS </li></ul><ul><li>HFCS - sweeteners derived from high fructose corn syrup </li></ul>
  15. 17. HFCS <ul><li>The outcome for producers in both countries hinges on the level of adoption of HFCS by the Mexican food industry. </li></ul><ul><li>If the Mexican soft drink industry were to adopt HFCS as its primary sweetener source, vast amounts of Mexican sugar would become available for export to the United States….. </li></ul>
  16. 19. Dominican Republic-Central American Free Trade Agreement (DR-CAFTA) <ul><li>The agreement was approved by the U.S. Congress in late July; as this paper was being prepared, however, it had not been implemented. </li></ul><ul><li>The DR-CAFTA contains provisions that relate directly to the U.S. sugar industry. </li></ul><ul><li>The U.S. TRQ system is a two-tiered tariff system. </li></ul>
  17. 20. DR-CAFTA <ul><li>The Office of the U.S. Trade Representative dismisses these increased sugar import volumes as insignificant and argues that these provisions “would not have a destabilizing effect on the U.S. sugar program </li></ul><ul><li>Once the minimum TRQ import level is reached, the only mechanisms USDA will have left to control domestic sugar supplies that are decreasing the domestic marketing allotments or decreasing the U.S. sugar market stabilization price (MSP). </li></ul>
  18. 21. Industry Group <ul><li>Florida Sugar Industry </li></ul><ul><li>Florida Crystals Sugar Corporation/Flo-Sun Incorporated and U.S. Sugar Corporation. </li></ul><ul><li>Florida sugar mills are modern and efficient, but labor costs are extremely high by world standards </li></ul><ul><li>lowest cost producer of sugar in the United States </li></ul>
  19. 25. Bibliography <ul><li>Buzzanell, Peter. 2000. “The North American Sugar Market: Recent Trends and </li></ul><ul><li>Prospects Beyond 2000.” Food and Agriculture Organization of the United </li></ul><ul><li>Nations. Sugar and Beverages Group, Commodities and Trade Division. Rome, </li></ul><ul><li>Italy. http://www.fao.org/DOCREP/005/X0513E/x0513e15.htm. </li></ul><ul><li>Buzzanell, Peter and Ron Lord. June 1995. “Mexico: Sugar and Corn Sweetener, and </li></ul><ul><li>Update.” Sugar and Sweetener Situation and Outlook . Vol. 20(2). U.S. </li></ul><ul><li>Department of Agriculture, Economic Research Service. Washington, D.C. </li></ul><ul><li>International Centre for Trade and Sustainable Development. 8 October, 2003.“FTAA: </li></ul><ul><li>US-Brazil Standoff Dims Prospects for Miami Ministerial.” Geneva, Switzerland. </li></ul><ul><li>http://www.ictsd.org/weekly/03-10-08/story4.htm. </li></ul><ul><li>International Sugar Organization. 5 May 2004. “The EU enlargement – implications for </li></ul><ul><li>the ISO membership.” Press Release by the International Sugar Organization </li></ul><ul><li>(ISO). London, England. </li></ul><ul><li>http://www.sugaronline.com/iso/editorials/editorials.asp?cat=7. </li></ul>
  20. 26. <ul><li>Sano, Diasuki. 2004. “Analysis of U.S.-Mexico Sugar Trade: Impacts of the North </li></ul><ul><li>American Free Trade Agreement (NAFTA) and Projections for the Future.” Ph.D. </li></ul><ul><li>dissertation. University of Florida, Institute of Food and Agricultural Sciences. </li></ul><ul><li>Food and Resource Economics Department. </li></ul><ul><li>Schmitz, Troy G., Andrew Schmitz and James L. Seale, Jr. 2003. “Brazil’s Ethanol </li></ul><ul><li>Program: The Case of Hidden Sugar Subsidies.” International Sugar Journal. 105, </li></ul><ul><li>1254. pp. 254-265. </li></ul><ul><li>Thelen, Martin. January, 2004. “Sugarbeet versus sugarcane: What are the main forces operating on the world market?” in Courier , The Bayer CropScience Magazine for Modern Agriculture. Bayer CropScience AG, Monheim am Rhein, Germany. http://www.agrocourier.com/index.cfm?PAGE_ID=1803 . </li></ul><ul><li>Trade Info. “European Union Agricultural Products – Sugar.” 25 November, 2004. Publication from the Europa External Trade “i” Center. Directorate General Trade of the European Commission. http://tradeinfo.cec.eu.int/doclib/docs/2004/november/tradoc_120339.pdf . </li></ul><ul><li>U.S. Department of Agriculture. June 1, 2005. “Sugar and Sweetener Policy” U.S. Department of Agriculture, Economic Research Service. Washington, D.C. </li></ul>

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