SUGAR PRICES TOO LOW TO BOOST LATIN OUTPUT
Latin American sugar producers
are awaiting further rises in world market prices before moving
to boost production, official and trade sources said.
    Although prices have risen to around eight from five U.S.
Cents per lb in the past six months, they are still below the
region's nine to ten cents per lb average production cost.
    The recent rise in prices has placed producers on the
alert, Manuel Rico, a consultant with the Group of Latin
American and Caribbean Sugar Exporting Countries (GEPLACEA),
told Reuters.
    However, Rico said, it would require another five to seven
cents to stimulate notable increases in output.
    "Producers are taking measures for increasing their
production when the prices are profitable," he said.
    Officials in Mexico, Guatemala and Ecuador said a continued
rise in prices would stimulate production, but industry leaders
in Panama and Costa Rica said there was still a long way to go.
    "The prices are ridiculous," said Julian Mateo, vice
president of Costa Rica's Sugar Cane Industrial-Agricultural
League. "At current prices nobody is going to consider
increasing production."
    Other producers are wary of committing funds to increasing
output, given the instability of world markets.
    An official at Colombia's National Association of Sugar
Cane Growers said they had no plans to raise export targets.
"The market is very unstable. What is happening is not yet
giving way to a pattern and so there is no reason to modify
anything."
    In 1985, the latest year for which full figures are
available, Central and South American nations produced 28 mln
tonnes, raw value, of sugar of which 12.3 mln were exported. A
year earlier, they had produced and exported about 800,000
more, according to the London-based International Sugar
Organization.
    Years of continuous low prices have plunged the sugar
industry in many countries in the region into a recession from
which it will be hard to recover.
    Miguel Guerrero, director of the Dominican Republic's
National Sugar Institute, said it would be difficult to boost
production even if prices recovered sharply.
    Output had slumped to under 450,000 tonnes a year from
900,000 in the late 1970s. Obsolete refineries, poor transport
and badly maintained plantations were barriers to any short
term recovery in output, he added.
    Plans of nearby Cuba, the world's largest cane sugar
exporter, to increase output to 10 mln tonnes a year by the end
of the decade seem ambitious, trade sources said. Output is
running well below the record 8.6 mln produced in 1970.
    Cuba suffers from run down plantations, harvesting problems
and poor processing facilities more than from low world prices,
since much of its output is sold to Eastern Bloc countries
under special deals. Last year, bad weather added to its
troubles, and output fell to 7.2 mln tonnes from 8.2 mln in
1985.
    The low world prices of recent years have led many
countries in the region to cut exportable production to levels
where they barely cover U.S. And, in the case of some Caribbean
countries, European Community (EC) import quotas, for which
they receive prices well above free market levels.
    Progressive reductions in the U.S. Quotas have led to
production stagnating or falling rather than being shifted to
the free world market.
    Peru, for example, shipped 96,000 tonnes to the U.S. In
both 1983 and 1984. This fell to 76,000 in 1986 and this year
its quota is only 37,000.
    A national cooperative official said that, as long as world
market levels continue at around half of Peru's production
cost, the future of the industry is uncertain.
    At a meeting of GEPLACEA in Brazil last October officials
stressed the need to find alternative uses for sugar cane
which, according to the group's executive-secretary Eduardo
Latorre, "grows like a weed" throughout the region.
    Brazil, the largest cane producer with output of around 240
mln tonnes, uses over half to produce alcohol fuel. Cane in
excess of internal demand for alcohol and sugar is refined into
sugar for sale abroad to earn much needed foreign currency.
    The difference in the price the state-run Sugar and Alcohol
Institute (IAA) pays local industry and what it receives from
foreign buyers costs the government some 350 mln dlrs a year.
    Soaring domestic demand for both alcohol and sugar over the
past year, coupled with a drought-reduced cane crop, has meant
Brazil will have difficulties in meeting export commitments in
1987, trade sources said. Negotiations to delay shipments to
next year have been indecisive so far, the main sticking point
being how Brazil should compensate buyers for non-delivery of
sugar it had sold at around five cents per lb and which would
cost eight cents to replace.
    Brazilian sugar industry sources said new sugar export
sales were expected to be extremely low for the next year, with
the Institute wary of exposing itself to domestic shortages of
either alcohol or sugar and because of the need to rebuild
depleted reserve stockpiles.
    However, the situation could change dramatically if the
economy goes into recession and internal demand slumps.
    Sources within Latin America and the Caribbean hold little
hope for the region's sugar industry to return to profitability
unless the U.S. And EC change their policies.
    "The agricultural policies of the European Community and of
the United States have caused our economies incalculable harm
by closing their markets, by price deterioration in
international commerce and furthermore by the unfair
competition in third countries," Brazil's Trade and Industry
Minister Jose Hugo Castelo Branco told the October GEPLACEA
meeting.
    The EC has come under prolonged attack from GEPLACEA for
what the group charges is its continued dumping of excess
output on world markets. GEPLACEA officials say this is the
main cause of low prices.
    GEPLACEA sees a new International Sugar Agreement which
would regulate prices as one of the few chances of pulling the
region's industry out of steady decline. Such an agreement
would have to have both U.S. And EC backing and industrialised
countries would have to see it as a political rather than a
merely economic pact.
    "They have to realise that the more our economies suffer,
the less capcity we have to buy their goods and repay the
region's 360 billion dollar foreign debt," GEPLACEA's Latorre
said.
 Reuter
