Tag Archives: commodity

What you need to know about the sugar industry

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History tells us of many accounts of how civilizations flourished through the introduction and development of resources that not only improved humanity’s way of life, transformed small towns to progressive cities, but also connected continents and cultures across the globe. One of these significant activities is the free exchange of goods and commodities in the form of trading.

Sugar is one perfect example of a valued commodity that has been present for many millennia and it has since travelled around the globe from its birthplace in Asia and Africa to its new homes in the Western worlds – but what made this particular product special?

Aside from human’s natural appetite for sweet food and drinks as well as its fermentation and preservation properties, there are many reasons why it survived the test of time and why it runs one of the most in-demand industries today.

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The United States holds the record for one of the largest sugar consumers and producers in the world and because of this, the sugar industry enjoys trade protection since 1789. Furthermore, through this trade deal, the US Congress enacted the very first tariff against sugar produced from other countries.

The U.S. government have also helped provide not only trade support but also protection for the domestic sugar industry through the so-called “Farm Bill” in 1990 – and this facilitated the establishment of the structure for the current U.S. sugar program.

The new sugar policies mandates several guidelines: One, under the U.S. sugar policy based on the 2008 Farm Bill, companies producing more sugar than their allotment permits (85%) will be forbidden to sell it and instead store the excess at their own expense. Under the same bill and related policies set by the U.S., the amount of sugar specifically allocated for import under Tariff-Rate Quotas must meet the country’s obligation of 22,000 tons of refined sugar and 1,117,195 tons of raw sugar set by the World Trade Organization.

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Globally, Brazil leads the world as the top sugar producer. For marketing year 2017/18, production reached 180 million tons, with Brazil, China, the European Union, India, and Thailand dominating the market. Sugar is among the world’s most traded agricultural commodities, along with coffee, grains, cocoa, and cotton. Hence, it is also an important part of most investors’ portfolio, whether in sugar company stocks or through sugar futures.