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MECAS(09)19 - The International Physical Trade of Sugar - a Survey

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This paper reviews the major changes and trends in the world trade flows of raw and white sugar over the past decade, the role and impact of existing and new drivers of the physical trade as well as changes in the composition of the trade by main ategory of sugar exporter and sugar importer.

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The past decade has seen a tremendous transformation in the composition of the world sugar trade. In the fast growing raw sugar market, the emergence of Brazil as a dominant origin has given rise to large quantities of sugar exports to the Middle East and Northern Africa, and to Eastern Europe, which now constitute the world’s two largest sugar trade routes. In the white sugar market, the abrupt fall in the volume of sugar exports from the European Union, following the reform of the EU Sugar Regime, has given
way to a dynamic new set of regional trade flows involving Brazil, the Middle East, Africa and the Far East, with the latter three regions participating as both main origins and destinations. These developments are linked, to a large extent, to the appearance of several new large destination refinery countries in the Middle East and North Africa as well as in Asia, further boosting import demand for high quality raw sugar (VHP) from the Western Hemisphere. Several countries with new destination refineries, like Algeria, Bangladesh, Morocco, Nigeria and the United Arab Emirates have been steadily climbing up the rankings of
raw sugar importers. As a result, destination refineries have increased their share in the imports of raw sugar from 48% in 2000 to over 60% today. Moreover, traditional white sugar importers with no home-grown production have been increasing their share in white sugar imports. Their share in total world trade increased from 50% to 59% between 2000-2002 and 2006-2008, a trend that is set to accelerate with the further increase in the white sugar intra-trade in Asia and Africa. In addition to a comprehensive overview on the main trade flows for raws and whites, the paper presents an analysis of trade drivers such as
freight rates and regional premiums and discounts for raw/white sugar. The increasing reliance on long haul routes for the sourcing of raw sugar in bulk has highlighted the impact that ocean freight rate volatility can have on world sugar trade flows. For instance, Brazil’s exports to Asia fell sharply last year as a result of significantly higher freight coupled with an increase in India’s export competitiveness. In addition, key industry players like producers at origin and refiners at destination have taken on a larger role in the trade, at the expense of traditional trading houses. Indeed, while in September 2008 19% of the sugar exports
leaving Brazil’s port of Santos were negotiated directly between a sugar producer and a sugar refiner at destination, this rose further to 25% in September this year.

 

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