Sugar

Brazil is the world's largest sugar exporter and dominates the trade in bulk raw sugar. Brazilian sugar exports have increased from approximately 1.5 million tonnes per annum in 1990 to an estimated 20 million tonnes in 2006/7. Brazil has benefited from growth in world sugar demand, reflecting the underlying upward trend in global sugar consumption. Furthermore, Brazil is the lowest cost sugar producer.

Global sugar demand is rising year-on-year as a result of population growth and increasing prosperity in emerging markets. Key areas of demand growth are Asia, the Middle East and Africa. Global sugar production is approximately 150 million tonnes per annum with a little over 40 million tonnes per annum trading across national borders. The global sugar market is now going through a period of structural change which will significantly alter the sugar market and result in greater price volatility and higher average prices.

One of the most significant changes to the global sugar market is expected to come about as a direct result of the reform of the European sugar regime which will lead to a sharp decline in EU sugar production and exports. In effect EU exports will be limited to approximately 1.3 million tonnes. This represents a sharp drop on historic export volumes, which have ranged between approximately 4 and 6 million tonnes each year.

While the decline in EU exports is significant in volume terms, it is also significant in price terms, as the EU exports were heavily subsidised.