Starting 2009 at a price of $370 per ton, sugar registered a significant increase within the period of a year and exceeded $800 before falling a little last week. The rise stems from a mismatch in supply and demand as excess rain curbed output in Brazil, the world’s biggest sugar producer, and dry weather disrupted crops in India, the second biggest, turning these countries into net importers. The prices are still predicted to remain at high levels for a long while, possibly increasing even further throughout the year and not returning to normal levels until yearend.The impact of the sharp price rise, of course, has been significant for sugar-based goods producers around the world. Its reflection on the Turkish market, however, is rather different compared to rest of the world, with only exporting firms feeling the repercussions, as the country’s sugar policy is to meet domestic demand through its own production.
“Firms producing exclusively for the domestic market were not affected by the increase in global sugar prices and we don’t expect there to be any rise in market prices of sugar-based goods,” said Şemsi Kopuz, president of the Sugar-based Product Industrialists Association (ŞEMAD), in an interview with Sunday’s Zaman. But exporters face difficulties in the provision of raw materials and in cost analysis because of extremely high sugar prices, he underlined.
Due to climatic factors, Turkey is capable of producing only sugar beet, which accounts for no more than some 10 percent of the world’s primary sources of sugar since its cultivation is far more costly compared to sugar cane. Turkey currently offers one ton of sugar derived from beet at a price of roughly $1,250, whereas a ton of sugar cane can still be found at lower prices despite recent record hikes.
Hence, in a bid to protect domestic sugar beet producers in the face of attractive prices offered by global sugar cane manufacturers with a Sugar Law put into effect in 2001, extremely high tariffs were imposed on imports and a quota regime was adopted to prevent production exceeding domestic needs. In addition, to assure exporters’ competitiveness with global players, the law enabled these firms to take advantage of Sugar C, which is offered at global sugar prices even though it is procured from sugar beet. The use of Sugar C, on the other hand, was confined to being processed only for export.
Freight fees cause loss of competitiveness
Even so, sector representatives still contend that Turkish sugar-rich goods exporters have low competitive power compared to global players for several reasons. Freight charges that firms have to pay sugar refineries lead the list according to many, drawing more criticism from exporters for putting them in a difficult position with recent record rises in prices. Charges currently amount to $60 per ton.
Disagreeing with this assertion, Recep Konuk, the president of the S.S. Beet Farms Cooperative Union (PANKOBİRLİK) and Konya Şeker A.Ş., states that if these firms had imported the sugar instead of purchasing from Turkish sugar refiners, they would still have to pay the same amount for shipment. “Price rises did not lead Turkish exporters to suffer from a decrease in competitive power in global markets. If they are exporting to Iraq, for instance, they compete with firms that face the same rises,” he argued.
On the contrary, Zekeriya Mete, head of the İstanbul Cereals, Pulses and Oil Seeds Exporters Union, opposes Konuk’s argument that possible shipment fees paid when importing sugar from overseas countries would have the same result. “If we had imported the sugar, the product would arrive at our production units, but now we have to pay an extra shipment fee of $40 to $50, which might even increase up to $80 depending on the distance between the sugar refineries and production units,” Mete said. He also drew attention to the lack of deferred payment options for the Sugar C. “As a sector with an added value percentage of 80 percent and providing employment to a huge number of workers, I can’t understand why sugar-based goods exporters were not supported in the face of such difficulties. They might, for instance, annul the freight charges and enable deferred payment,” he argued. “The government’s 2023 target is to reach $500 billion in exports. But how this can be achieved unless you extend support to sectors such as this?”
Subsidies despite WTO rules
Exporting to 200 countries, Turkish sugar-rich food producers suffered only a 4 to 5 percent contraction in exports last year despite skyrocketing sugar prices along with the global financial meltdown. Sugar prices will eventually return to their normal levels, Mete says; however, he does ask how the markets lost by the exporters would be regained or what would happen to those firms that would have to close their doors.
In reference to another factor putting Turkish exporters in a less competitive position, Mete also argues that sugar-based products producers in Europe are being subsidized covertly despite World Trade Organization (WTO) rules which limit the amount of sugar that can be exported, in a bid to remain competitive in the global market. However, he says, the rules are strictly implemented in Turkey, which indeed creates a disadvantageous situation for Turkish exporters.
Recently, the EU has drawn harsh criticism from Australia, Brazil and Thailand -- the world’s three biggest sugar exporters -- for its plans to sell an extra half a million tons of sugar, exceeding the quota set under WTO agreements. This is a clear indication of a prohibited subsidy, they claim. The EU, however, rejected these allegations, saying that the extra production is completely legal and was not subsidized.
National
