Consumer pays bill
Sugar deal victory for Trump policy
The US government confirms that the country has signed a sugar deal with Mexico. On Monday 5 June, rumors were already circulating. Commercial Secretary Wilbur Ross and Agriculture Secretary Sonny Perdue say the deal is lucrative for the US sugar industry. It is a victory for market protectionism and therefore for Trump's policies.
On Tuesday, June 6, US Secretary of Agriculture Sonny Perdue issued a statement regarding the deal. Earlier that day, commercial secretary Wilbur Ross was already in the news. He closed the deal with Mexican economy minister, Ildefonso Guajardo. This puts an end to the dispute that has been dragging on between the two countries for years. It is hoped that this will provide perspective for the upcoming NAFTA negotiations. The free trade agreement between the US, Canada and Mexico.
Benefits for Americans
The old sugar agreement dates from 2014. It expired on 5 June. A day later, there is a new agreement that both parties can agree to. The benefits largely lie with the Americans, although a price has to be paid for this. The 2014 Suspension Agreement set requirements for the amount and type of Mexican sugar that could be shipped to the US each year. Those requirements are now being tightened.
Consumer pays bill
Perdue's statement is full of patriotism: "The deal improves the US sugar industry and protects American consumers and workers," it reads. However, that is also the group that pays for the deal. The limit on the tonnage of refined sugar that Mexico can export to the US is being lowered from 53 to 30 percent.
The sugar lobby previously pushed for a cut to 15 percent. In addition, raw sugar may only be transported in bulk via ships. The Americans want to prevent high-quality raw sugar from finding its way directly to the consumer.
1
billion sek
Rock-solid sugar lobby
As a medium of exchange, the Mexicans are paid more for their sugar. The bill for this ends up with the consumer. In a statement, prepared by a coalition of American sugar buyers, the deal is harshly criticized: 'The deal only benefits beet and cane sugar producers in the United States. The cost of this deal is estimated to be $1 billion due to rising prices for food, beverages and candies.” It is the result of a rock-solid sugar lobby in Washington.
Sugar price continues to fall
Meanwhile, the futures market for sugar in London is under considerable pressure. Prices have fallen sharply since February. On Tuesday, June 6, the quote for the August contract closed at 367 euros per tonne. That level is the same as in April 2016. In September last year, the low of less than 310 euros per tonne was reached. Wednesday morning, June 7, the contract is slightly in the plus again.
The reasons for the striking downward spiral are mainly the good harvest prospects for the 2017/2018 season, the decreasing value of the Brazilian acreage and an appreciation of the euro against the dollar.
More sugar on the world market
Analysts expect world sugar production of between 187 and 189 million tons, with consumption between 181 and 183 million tons. The world stock is thus growing. Especially Europe, Brazil and India are expanding their production considerably. The International Sugar Organization (ISO) in London expects a harvest of 168 million tons, with consumption of 174 million tons.
Sugar prices on the London futures market have been falling since February. The level is now the same as April 2016. More charts? look at the Database.
Niels van der Boom
© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.