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The World Sugar Market
WORLD MARKET
Having reached an 18 month high of US Cents 15/lb in March, fuelled partly by speculative interest, the raw sugar price has since fallen back dramatically as the underlying physical market and the recent feverish activity on the futures market have become more aligned. The current supply glut combined with weak trading, a strengthening dollar, high freight rates and a large Brazilian crop have dampened the market and the New York No. 11 price is now around US Cents 9.5/lb (July delivery).
Looking forward, supply and demand are expected to be more evenly balanced in 2008/09 in response to a large uptake of cane and beet for ethanol, a large swing away from India and growing consumption. These all bode well for an upturn in prices and this is reflected in longer term futures.
USA
Congress enacted the US$ 290 billion Farm Bill in mid May overriding a presidential veto. The key provisions on sugar include an increase in the loan rate (effectively the floor price for sugar), a programme to send excess imported sugar, which would otherwise depress prices, to ethanol and the allotment of at least 85 percent of the US sugar market to American producers (the balance being sourced from imports under NAFTA, CAFTA and from Tariff Rate Quota holders).
EU
The EU would appear to be satisfied at the pace of reform of the EU regime and especially at the extent of quota renouncements. Consequently the EU is not considering any new sugar measures at present.
WTO Doha Round Negotiations have recommenced in Geneva and the recent UN Food Summit in Rome backed the rapid conclusion of the Round.
The World Sugar Market