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MECAS(13)06 – International Survey on Prices for Sugar Cane/Beet and Competing Crops– English

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Publisher: International Sugar Organisation
Format: digital download (PDF), 11.7” × 16.5”
Pages: 47
Publication date: June 2013
Languages: English*


Abstract

A downward drift of world market values for sugar on the back of the global surplus in 2011/12 and 2012/13 combined with expected rising returns from other crops has brought a sentiment in the market that cane and beet growers might decrease their output by reducing the areas devoted to sugar crops. In the present survey the ISO is trying to test this perception by examining how changes in the comparative attractiveness of sugar crop growing versus alternative crops impacted sugar crop areas in the past. This is the first ISO survey focusing not only on nominal (gross) income from one hectare of land under sugar cane or beet, but also on the returns from the competing or alternative crops in a wide range of countries. The survey provides information on areas, yields, and farm prices for sugar and competing crops in a number of key cane and beet growing countries for the period between 2001 and 2011. Cane areas increased with an annual average growth rate of 2.7%. This can be compared to a nearly 30% reduction in beet areas between 2001 and 2008, followed, however, by a roughly 20% rebound in beet acreage in recent years. The fact that areas under cane keep growing more than three times faster than the amount of arable land globally, when coupled to the recent rebound in beet acreage, can be viewed as circumstantial evidence of the general economic attractiveness of sugar crop production. This observation is further supported by findings of the present survey. Generally, neither trends of substitution of sugar crops by other crops nor strong correlations between changes in areas under sugar crops and gross incomes per hectare of land occupied by alternative crops have been identified.

Both cane and beet normally have to be sold to the processing industry. Currently, sugar crop processing is believed to be one of the most capital-intensive of all the agricultural commodity processing sectors, frequently involving investment of more than USD150 mln for one processing unit. Long-term supply arrangements are often put in place. The processing sector tends to take a long-term view of the market prospects. Sugar cane's resilience can also be explained by its perennial nature. Once planted, the cane is productive for several years. Beet is an annual crop. Its response period, in theory, should be shorter, because the asset conversion cycle does not exceed 12 months. Nevertheless, the beet sector is, like the cane sector, capital-hungry, and this limits the producers' ability to respond quickly to changing price structures in both domestic and world markets. Moreover, the system of crop rotation in itself limits competition for land, as only a certain share of land can be used for cultivation of one crop during any given year. Weak correlations between changes in areas under sugar crops and gross incomes per hectare of land occupied by alternative crops can be also attributed to a small proportion of total arable land used for cane and beet growing (3.5% on average, in the case of cane, and 0.8% in the case of beet). Meanwhile, most of the alternative crops such as corn, soybeans, wheat, rice, etc. are agricultural “majors”. As a result, even a modest year-to-year change in areas of a major crop may completely override variations for much smaller sugar crops.

 

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