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MECAS(09)18 - Domestic Sugar Prices

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With the continuing globalisation of the world sugar economy the importance of domestic market sugar prices is growing. In contrast to well-monitored world market prices, information on domestic prices is patchy and sometimes difficult to obtain.

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In 2003 in a study “Domestic Prices for Sugar: International Comparison” (MECAS (03)20) the ISO provided a seven-year series of annual averages for domestic prices (at retail level) in more than 100 countries. The current paper provides an update on the 2003 survey for the period from 2002 to 2008 but also a wider scope including information on domestic prices at wholesale level. Apart from being a reference
paper on domestic prices at both retail and wholesale levels, the study also identifies links between world and domestic prices focusing on the correlation between them. During the period under review, as can be expected, the world average domestic price at both the retail and the wholesale level remained significantly
higher than world market prices. The domestic markets of importing countries with typically high cost of production and import duties, are characterized by prices about 30% higher than those in exporting countries. Generally, domestic prices in beet growing countries are higher than those in cane sugar producing countries. Of particular importance, there is a high degree of dispersion of individual countries
data for both retail and wholesale prices. Our analysis of domestic price dynamics also shows how domestic prices can be influenced by the size of the domestic crop, the level of self-sufficiency and the stock situation. Changes in sugar policy (introduction or removal of import duties, changes in the level of state-controlled prices, purchases of sugar for stocks and releases of sugar from stocks government
reserves, etc.) are also impacting domestic prices. Unexpectedly up to a point, the weighted world average domestic prices series shows a high correlation with world market prices. However, national sugar balances are of paramount importance in determining the dynamics of domestic prices. At the same time, it can be argued that changes in world market prices are highly dependent on the global supply/ demand situation which in its turn represents a net result of developments in individual countries.

 

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