A change of minister in Costa Rica will aid in increasing the cost of sugar via an import tariff hike, harming consumers and the food industry, and increasing protection for the powerful sugar lobby.
EDITORIAL
The decision taken by the new chief of the Ministry of Economy reflects a clear interest in meddling in a process that should be resolved at a technical and non-political level.The decision to declare whether or not dumping occured in a particular market and what measures should be taken in response, corresponds to the office of Trade Defense, and should be free from any possible political bias.
The Ministry of Economy has decided to impose a new tax of almost 7% on sugar imported from Brazil, in response to a lawsuit brought by the union of local producers.
With this new protectionist measure the government is trying to put an end to a conflict that arose in 2015 between the Agricultural Cane League (Laica) and the importer Maquila Lama, when this company denounced a proposal to amend the regulation on sugar fortification claiming it attempted to restrict trade of imported grain.
The FAO food price index grew by 2.1% compared to December due to a sharp rise in international prices of sugar, cereals and vegetable oils.
From a statement issued by the World Food Organization:
» The FAO Food Price Index* (FFPI) averaged 173.8 points in January 2017, up 3.7 points (2.1 percent) from the revised December value. At this level, the FFPI is at its highest value since February 2015 and as much as 24.5 points (16.4 percent) above its level in the corresponding period last year. The strong rebound in the January value of the FFPI was driven by a surge in international sugar quotations and sharp increases in export prices of cereals as well as vegetable oils. Meat and dairy markets remained more stable.
The decline in the FAO food price index in November was due to a sharp fall in sugar prices, which more than offset a sharp spike in prices of vegetable oils.
From a statement issued by the United Nations Food and Agriculture Organization:
The FAO Food Price Index* (FFPI) averaged 171.3 points in November 2016, only 0.4 percent below its October level, but still 10.4 percent higher than in November 2015. The month-to-month small decline marked a departure from an almost uninterrupted rising trend in the Index since the start of the year. November’s easing was driven by a sharp dip in sugar prices, which more than offset a strong rebound in the prices of vegetable oils.
In 2015 Guatemala led the export of raw sugar with $848 million, followed by El Salvador with $178 million and Nicaragua with $114 million.
Foreign Trade figures for Raw sugar in Central America, analyzed by the Business Intelligence unit at CentralAmericaData report that in 2015 the countries in Central America exported a combined total of 3 million 292 thousand tons of raw sugar equivalent to $1.289 billion.
The union of producers has estimated crop production for 2016/17 at 12 million hundredweight, slightly above the results seen in the previous season.
Of the total that the Association of Sugar Producers of Honduras (APAH) estimates will be produced, 70% will go to the local market, and the remaining 30% will be for export, from which it is expected that $100 million will be earned.
A study requested by the union will determine how sugar profits should be divided between producers and industrialists, providing information for a law reform.
The information derived from the study, which according to the Salvadoran Sugar Industry Council, is being undertaken by the FAO, could solve part of the conflict over the distribution of profits between manufacturers and producers.
As of August 2016 exports of coffee, shrimp, palm oil, sugar and vegetable and fruit preparations were worth $1.46 billion, 6% less than in the same month in 2015.
From the report "Foreign Trade General Merchandise" by the Central Bank of Honduras:
In August 2016 the export ofagro - industrial goodswas US $1.4605 billion (53.8% of total), reflecting a decrease of US $94.5 million (6.1%) compared to the same period in 2015. The most representative products within this activity were: coffee, palm oil, shrimp, cigars, sugar and fruit and vegetable preparations; which together constituted 84.1% of this activity.
In October 2017 production limits and the "out of -quota" production concept will eliminate for the manufacture of biofuel and industrial non-food products.
The current production quota for sugar according to the European Common Agricultural Policy (CAP), which applies to the 28 countries in the bloc, is 13.5 million tons per year.The production capacity of sugar producers in the European bloc is higher than the quota, therefore eliminating production limits will lead to a lowering of prices due to excess supply, similar to what has already happened in the milk market following the elimination of production quotas.
The Brazilian Raízen has allied itself with the agricultural commodities company Singapore Wilmar, to create the largest exporting sugar group in the world with 4.5 million tons per year.
From a press release by Wilmar:
São Paulo and Singapore, October 4TH, 2016 – Raízen Energia S.A. (Raízen) and Wilmar International Limited are pleased to announce the creation of a new joint venture called "Raízen and Wilmar Sugar Pte.
A sugar mill in Chiriqui is investing $41 million in modernization of the factory and the construction of a cogeneration plant with capacity of 32 MW.
In the first stage of works the mill Central Azucarero de Alanje S.A. (Cadasa) projects consumption of 8 MW in operation and uploading the remaining 24 MW to the national grid.
In the period 2015/16 the amount of agricultural land dedicated to planting sugarcane fell by 1000 hectares compared to the previous cycle.
A report by the Office of the Comptroller General of Colombia said that the harvest in the 2015/16 period was almost unchanged, down just 0.6% from the previous production cycle. The harvest went from 38.208 hectares to 37.995 hectares.
The Commission to Promote Competition in Costa Rica has launched an investigation against Liga Agrícola de la Caña after a complaint was made by Maquila Lama.
The Commission to Promote Competition has ordered a process to be opened to determine whether Liga Agrícola de la Caña (Laica) committed anticompetitive practices, as claimed by Maquila Lama in June this year, noting that "...
The drought caused a decline of 18% in the 2015/16 harvest, and exporters project a reduction of $40 million in foreign sales.
Sugar producers are backing a plan to improve productivity per hectare in the next harvest in order to try to recover some of what was lost in the 2015/16 harvest.In the current harvest the climate phenomenon reduced total production to 2010 levels, falling from 790 thousand tons in the period 2014/15 to 650 thousand tons in 2015/16.
At the request of the Agricultural Cane League the government has extended until the end of November the investigation into alleged dumping against the sugar importer La Maquila Lama.
The as yet unresolved conflict could once again make its presence felt with the import of organic sugar on the part of the Agricultural Cane League and also the importer La Maquila Lama, who filed with the Commission to Promote Competition (COPROCOM) a complaint of alleged monopolistic practices.See: "Sugar War in Costa Rica".