THE WORLD SUGAR MARKET: OPPORTUNITIES FOR SOVIET INFLUENCE

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• Collection: General CIA Records
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• Document Creation Date: December 21, 2016
• Document Release Date: April 21, 2009
• Sequence Number: 8
• Publication Date: October 1, 1983
• Content Type: REPORT

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Directorate of Confidential
Intelligence
The World Sugar Market:
Opportunities for Soviet
Influence
An Intelligence Assessment
ON FILE US DEPARTMENT OF
AGRICULTURE RELEASE
INSTRUCTIONS APPLY
Confidential
GI 83-10235
SOV 83-10178
October 1983 /~
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Intelligence
The World Sugar Market:
Opportunities for Soviet
Influence
This paper was prepared by
Economics Division, Office of.Global Issues,
and Soviet Economy Division,
Office of Soviet Ana ysis.
Comments and queries are welcome and may be
directed to the Chief, Commodity Markets Branch,
OGI,
Confidential
GI 83-10235
SOV 83-10178
October 1983
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The World Sugar Market:
Opportunities for Soviet
Influence
Key Judgments As a result of chronic overproduction, a glut of sugar exists on the world
Information available market and prices are depressed. This situation is likely to persist for quite
as of 30 September 1983 some time, putting added financial pressure on LDC exporters.
was used in this report.
Poor sugar harvests in the USSR during the past few years have thrust
Moscow into the forefront of international sugar trade. In 1982, the USSR
imported more than 7 million tons of raw and refined sugar, about 25
percent of total world sugar trade. Current purchasing behavior suggests
that the USSR will remain a major sugar importer in 1983. Beyond that,
we estimate that Soviet sugar production will consistently fall short of plan
through the 1980s. Although Cuba will remain the USSR's dominant
sugar supplier, Moscow may need to buy several million tons annually from
other suppliers during the next few years. This requirement could be pared
back later in the decade if Moscow succeeds in reviving its stagnating
sugar sector.
The ability to move among suppliers enables Moscow to use its purchases
to cultivate political good will and influence among sugar-producing LDCs.
Although the majority of Soviet purchases are based on supply and
demand conditions, political considerations are factored into Soviet calcu-
lations. During the past eight years, Soviet sugar purchases from Peru, for
example, occurred in only two years-1975 and 1980. In both of those
years, there was a change in Peru's government. The one recent Soviet
sugar purchase from Zimbabwe occurred in 1980, the first year of
independence. As for other examples, the only Soviet sugar purchase from
Guyana occurred in 1975, the same year that Moscow's first resident
diplomatic mission arrived in that country. The Soviets first purchased
Nicaraguan sugar in 1980, just after the current leftist regime came to
power. Whether the Soviet Union pursues such a course in the future will
depend on the perceived benefits; relationships with existing suppliers,
particularly Cuba; and hard currency constraints.
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GI 83-10235
SOV 83-10178
October 1983
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Although Soviet moves to apply the sugar lever are likely to improve only
marginally Soviet influence overall in the Third World, in individual cases
the political gains could be great. Soviet officials know that the prospect of
Soviet purchases looms large to sellers in a glutted market, particularly for
financially strapped LDCs. Moscow's targets of opportunity may include:
? Supporting new leftist regimes, such as Nicaragua, and existing Soviet
clients, such as Mozambique.
? Making inroads in countries, like Guyana, with surplus sugar and
faltering economies.
? Influencing countries squarely in the US camp, but with whom Moscow
would like better ties, such as Thailand.
? Nudging nonaligned states, such as India, Argentina, and Peru, in
Moscow's direction.
From a US perspective, the highly politicized nature of the world sugar
market has further complicated a number of broader issues, including
North-South relations, global trade barriers, and the LDC debt problem.
Having imposed a sugar import quota in May 1982, the United States can
expect to be buffeted from all sides over its domestic and international
sugar policies as they relate to these issues. Moreover, if the Soviets play
their sugar card adroitly, Moscow will be able to have an impact on at least
some of these areas.
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Key Judgments
World Sugar Outlook: Chronic Overproduction 1
The USSR's Role in the World Sugar Market 3
Looking Ahead 5
The Sugar Lever-A Political Perspective 6
World Sugar Statistics 11
1. World Sugar
2. Sugar Consumption
3. Sugar Prices
4. Selected Countries: Share of Sugar Exports to the USSR, 1982 4
5. Selected Countries: Sugar Export Earnings as a Share of Total 8
Exports, Average 1978-81
6. USSR: Sugar Import Shares, 1982
1. Selected Non-Communist Countries: Sugar Policies
2. USSR: Refined Sugar Production, Consumption, and Imports 4
3. USSR: Raw Sugar Imports
4. Comparison of US and Soviet Sugar Imports From
Selected Countries, 1982
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Table 1
Selected Non-Communist Countries: Sugar Policies
European
Community
To expand and diversify export
markets; to return export industry
to private sector by 1989.
To maintain sugar self-sufficiency
and farmer incomes through do-
mestic subsidies; to maintain ex-
ports and reduce sugar stocks.
To encourage domestic production
and consumption through the use
of subsidies under a policy called
low cost and low prices; export
policy unclear.
To increase production through
yield improvements; to raise indus-
try earnings; to diversify export
markets away from reliance on the
United States.
To encourage increased sugar ex-
ports under a broad export diversi-
fication campaign. .
To become self-sufficient by in-
creasing production and refining
capabilities.
Protection of domestic sugar pro-
ducers from import competition
through use of import duties and
surcharges; luxury tax on consump-
tion.
To limit all imports, including
sugar.
Low export prices and rising
production costs are squeezing pro-
ducers; subsidies are becoming pro-
hibitive; excess production, given
depressed market demand.
High production costs coupled with
low world prices are squeezing
farmers' incomes; subsidies to
farmers and costs of stockpiling are
putting pressure on EC budget.
Overproduction, mounting surplus-
es, inadequate shipping capacity;
state governments at odds with
New Delhi's pricing policies.
Long-term export contracts at
above-market prices expire in 1984,
putting industry profitability in
jeopardy; extended drought.
Extended drought, reduced cane
acreage, high fertilizer prices, inad-
equate prices to cane growers.
Lack of producer incentives be-
cause of high costs and low world
prices.
Declining demand resulting from
more health-conscious consumers
and competition from substitute
sweeteners; low profitability and
serious overcapacity in the refining
industry.
Antiquated mills, poor mainte-
nance, lack of spare parts, poor
living conditions for cane growers
and mill workers; low sugar prices
(10 cents per pound) encourage con-
sumption.
Rising sugar imports depleting
scarce foreign currency reserves.
Reducing subsidies; raising gasohol
production with sugar as a
feedstock.
Moderating subsidy increases;
working through the ISO to im-
prove the sugar market; attempting
to spread stockpiling costs to other
exporters and importers.
Reduced payments to growers; oth-
er measures under consideration in-
clude a larger buffer stock, higher
ISO export quota, improved ship-
ping schedules, financial aid to sug-
ar mills.
Encouraging improved cropping
practices; increasing minimum sup-
port prices to growers.
Bangkok plans to raise sugarcane
prices and to persuade growers to
maintain acreage.
Raising government subsidies to
growers.
Removal of protective measures
under a 1978 law that regulated
market shares and guaranteed re-
finers against losses.
Decree by President de la Madrid
restructures the industry around
new central organization called
Azucar, S. A.; industry demands
that domestic price be raised to 31
to 34 cents per pound.
Doubling of import tariffs and in-
stitution of limited sugar import
licenses; large-scale projects to in-
crease domestic production.
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The World Sugar Market:
Opportunities for Soviet
Influence
As the world's largest sugar buyer, the Soviet Union
is in a position. to use its sugar purchases as a foreign
policy tool. Whereas sugar consumption in the United
States is falling dramatically, Soviet sugar consump-
tion is large and growing, and domestic production is
erratic. A combination of poor sugar harvests in both
the USSR and Cuba during some of the past few
years has thrust Moscow into the forefront of interna-
tional sugar trade. Thus, to meet domestic needs, the
USSR imported more than 7 million tons of raw and
refined sugar in calendar year 1982, about double the
level of seven years ago. Of this amount, Cuba
supplied about 4 million tons.
While Soviet consumption has risen rapidly, demand
for sugar in the industrial countries has stagnated or
declined. As a result, a glut of sugar exists on the
world market and prices are depressed. For the debt-
troubled less developed countries (LDCs) who are also
sugar exporters, sugar sales are important to their
economies. This situation provides Moscow an oppor-
tunity to cultivate political good will and influence
among certain LDCs while satisfying domestic sugar
requirements at a relatively low economic cost.
World Sugar Outlook: Chronic Overproduction
With the exception of a handful of years when major
crop failures occurred, world sugar production has
consistently outpaced consumption since World War
II. During the past 10 years consumption has exceed-
ed production only twice-in 1979 and 1980 (see
figure 1). Our review of national policies and
reporting by agricultural attaches indicates that the
production/consumption gap has also been widened
by production subsidies designed to bolster farmers'
incomes and minimize sugar imports, as well as
attempts by exporters to maintain sugar earnings in
the face of falling prices (see table 1). As a result,
output has failed to respond as effectively to surpluses
Figure 1
World Sugar
Production and
Consumption
__II I ~ I I II I I IJ I, I I II
Last year, sugar production reached a record level.
Between 1980 and 1982 world sugar output xose
nearly 19 percent, topping 100 million tons for the
first time.' Crops benefited from generally good
weather and expanded area, especially in the Europe-
an Community (EC) where sugarbeet production in-
creased 16 percent. Several major cane-producing
countries that had poor crops in 1980, including India,
Thailand, and Cuba, also managed to boost output to
trend levels. World sugar consumption, on the other
hand, rose only 5 percent, despite the fall in world
prices. In the United States, sugar consumption
declined about 9 percent; consumption in the EC
declined about 4 percent.
and low prices as it has to shortages and high prices
(see inset, "World Sugar Trade").
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World Sugar Trade
Most sugar is consumed in protected or restricted
domestic markets of sugar producing countries. Only
about 30 percent of production enters world trade.
Almost a third of the sugar traded is sold under
special arrangements involving preferential prices.
This includes trade among Communist countries and
duty-free exports to the European Community by the
African, Caribbean, and Pacific producers under the
Lome Convention. In addition, some sales are negoti-
ated on the basis of long-term contracts. Unlike other
commodities, such as coffee or cocoa, only a relative-
ly small share of world sugar production-less than
15 percent-is purchased on the free market at the
world price.
The thinness of the free market tends to aggravate
sudden price swings resulting from shortages or
surpluses. Output does not respond as rapidly to
surpluses and low prices as it does to shortages and
high prices, however, because:
? Sugarcane will produce for a number of years
before replanting is necessary.
? It is expensive to shift from cane, which accounts
for almost two-thirds of world sugar production, to
other crops.
? Factories built to refine sugar cannot be used for
other purposes.
This year's production/consumption picture is likely,
to show little change. The US Department of Agricul--
ture estimates world sugar production for crop year
(September-August) 1982/83 at nearly 99 million
tons. A record Brazilian crop and near-record produc-
tion in India have largely offset small losses else-
where. World sugar consumption in 1982-83 is ex-
pected to grow by only 2 percent, not enough to bring
the market into balance. Consumption gains in the
LDCs are being offset by stagnating consumption in
the key markets-the United States, Western Europe,
Canada, and Japan (see figure 2).
The large imbalance between production and con-
sumption during the last two years has led to record
world sugar stocks
? In many beet producing countries, production ad-
justments are inhibited by government protectionist
policies.
Attempts to reduce price fluctuations have led to four
international sugar agreements, the most recent in
1977. The agreement established export quotas and a
system of reserve stocks designed to hold prices
within a range currently set at 13 to 23 cents per
pound.
None of the agreements has been successful in limit-
ing the world price to the target range. During the
first two years of the current agreement, prices
averaged well below the bottom of the then-agreed
range. In late 1979, supply prospects dimmed as a
result of a coincidence of bad weather, crop disease,
and planned reductions in acreage. The market ap-
parently was not convinced that reserve special stocks
were in place. Large Soviet purchases through West
European sugar brokers, together with speculation,
helped send prices soaring to more than twice the
upper limit of the price range. Before the end of 1980,
however, the price was headed downward, mainly
because of favorable production prospects; by 1981
the price had fallen below the floor price.
sugar stocks were expected to have risen by an
additional 5 million tons by season's end (31 August
1983).
World sugar prices, until recently, were limping along
at roughly 6 cents per pound, the lowest level in.10
years and only 15 percent of their October 1980 high
(see figure 3). Although prices were buoyed by news of
poor Cuban and EC crop prospects, the large stock
overhang effectively capped the price rebound. After
reaching nearly 13 cents per pound in late May, sugar
prices have settled back to the 9- to 11-cent range.
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Figure 2
Sugar Consumption
Figure 3
Sugar Pricesa
40 A
30
20
10
73/74 74/75 75/76 76/77 77/78 78/79 79/80 80/81 81/82 82/83
sugar
consumption can be expected to grow only about 1.5
percent annually through 1990. In the industrialized
countries, demand is stagnating or declining because
of a number of factors, including changing tastes,
increased interest in health foods, slower economic
growth, and competition from substitute sweeteners.
Sales of corn sweeteners, which received a major
boost from the high sugar prices of 1980 as well as
recent low corn prices, have hurt sugar sales. Most of
the displacement has been in the United States,
Japan, and Canada-all major sugar-importing coun-
tries. In the United States, corn sweeteners have
taken about 40 percent of the sweetener market as the
major cola companies continue to increase their use of
high fructose corn syrup (HFCS) in soft drinks.
Only the developing nations are likely to show signifi-
cant increases in sugar demand. Even this expectation
could prove optimistic if LDCs continue to find
themselves financially strapped. Sugar consumption
in the LDCs passed that of the developed countries-
which use large quantities of other sweeteners-for
1972 73 74 75 76 77 78 79 80 81 82 83 84 25X1
the first time in 1982, and there is no indication-of a 25X1
long-run slackening of demand, even in Central
America and South America where annual per capita
consumption approaches 45 kilograms. Industrial use
of sugar in processed foods and beverages is the key to
future consumption trends in these countries. In Mex-
ico, Brazil, and Argentina, industrial sugar use now
constitutes 35 to 50 percent of the market. If the rest
of the Third World follows this pattern, LDC sugar
use will grow considerably during the 1980s.
Recent Developments
Recent trends in Soviet sugar production and con-
sumption have made the USSR an increasingly im-
portant player in the world sugar market. Per capita
sugar consumption in the USSR currently amounts to
44.5 kilograms, a figure equal to about 70 percent of
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Table 2
USSR: Refined Sugar Production,
Consumption, and Imports
1975 10.4
1976 10.8
1977 11.0
1978 11.2
1979 11.3
1980 11.8
1981 11.9
1982 12.0
1983 b 12.3
a From domestic crops only.
b Estimated.
7.4
6.2
8.2
8.6
7.3
6.6
5.9
6.8
7.3
Cuba Other
2.8 0.3
2.9 0.6
3.3 1.1
3.5 0.1
3.4 0.2
2.4 2.2
2.9 2.0
3.9 2.9
3.2 2.2
Figure 4
Selected Countriesa: Share of Sugar
Exports to the USSR, 1982
Cuba
Argentina
EC
Canada
Dom. Republic
Thailand
Philippines
Brazil
Columbia
Australia
Nicaragua
F
US per capita consumption of sugar and other sweet-
eners. If limited to sugar alone, Soviet consumption
exceeds that of the United States by about 30 percent.
The steady growth in consumption for more than two
decades reflects the importance of sugar in improving
the quality of the Soviet diet. In an economy that has
experienced substantial difficulty supplying quality
foods, sugar has added variety and palatability to an
otherwise dull diet.
Soviet sugar production has stagnated as a result of
four consecutive poor sugar beet harvests (see table 2).
Throughout this period, output averaged only 72
million tons a year, compared with targets of 97-98
million tons. In 1981 and 1982, sugar beet production
totaled only 61 and 71 million tons, respectively. On
the basis of analysis of weather conditions, we expect
the 1983 crop to show considerable improvement-
reaching 80-85 million tons-but again to fall short of
the target of 96 million tons.
Moscow has responded to the poor crops by boosting
imports. In 1982, Soviet purchases of raw and refined
sugar reached a record 7.4 million tons, 40 percent
higher than in 1981 and about double the 1976 level
(see table 3). Havana continues to be the USSR's
chief supplier, although its share of the Soviet import
market has fallen from more than 90 percent in 1976
to less than 60 percent in 1982 (see figure 4).Z
The increase in Soviet sugar import needs has trans-
lated into a dramatic rise in Soviet purchases in the
free market, from an annual average of more than
450,000 tons in 1975-79, to 2.3 million tons in
1980-82. Six countries-Thailand, Brazil, the Philip-
pines, the Dominican Republic, Australia, and Argen-
tina-and the EC accounted for about 95 percent of
these imports. The EC alone provided more than 40
percent.
Current purchasing behavior suggests that the USSR
has remained a major sugar importer in 1983. Total
deliveries from Cuba will reach roughly 3.5 million
tons, a reduction of 700,000 tons from last year.
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Table 3
USSR: Raw Sugar Imports
3,237
3,760
4,776
3,993
4,080
4,981
5,204
7,363
3,231
3,816
3,800
3,766
2,972
3,127
4,408
2,964
3,067
3,652
3,797
3,707
2,647
3,090
4,224
Free market
271
529
959
193
315
2,010
2,078
2,954
Argentina
0
0
0
12
0
13
150
127
Australia
51
0
0
0
0
157
Austria
0
0
0
0
0
36
14
50
Brazil
95
0
24
83
69
466
347
362
Canada
0
0
0
0
0
0
14
22
Colombia
0
0
0
0
0
11
12
36
Dominican Republic
0
0
0
46
0
33
14
194
European
Community
0
298
.249
40
235
856
873
1,263
El Salvador
0
0
0
0
0
26
0
0
Finland
0
0
0
0
0
19
62
4
Gabon
0
0
0
0
0
0
5
0
Guatemala
0
0
0
12
0
15
0
64
Guyana.
20
0
0
0
0
0
0
0
Mozambique
0
0
0
0
0
0
0
25
Nicaragua
0
0
0
0
0
13
0
5
Peru
105
0
0
0
0
24
0
0
Philippines
0
224
635
0
0
333
281
216
Swaziland
0
0
0
0
0
10
0
0
Thailand
0
0
0
0
11
140
266
429
United States
0
0
0
0
0
0
40
0
Zimbabwe
0
0
0
0
0
15
0
0
Other
0
7
51
0
0
0
0
0
considerably.
Purchases from remaining suppliers are likely to total
about 2.5 million tons. the
USSR is likely to purchase 1 million tons from the EC
again this year. This level of trade, coupled with a
400,000-ton increase in purchases from Brazil, sug-
gests that imports from other suppliers could decline
Looking Ahead
Beyond 1983, Soviet imports from countries other
than Cuba will be determined by Moscow's plans for
modest rates of increase in sugar consumption and the
size and quality of its domestic sugar beet crops. We
estimate that Soviet sugar production will consistently
fall short of needs through the 1980s, resulting in a
continuing demand for imports from both Cuba and
the international market.
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Soviet requirements for sugar, given the trend of
1-percent annual growth in per capita consumption,
could be as high as 14 million tons by 1990. Long-
range Soviet plans call for annual growth in per capita
consumption of less than 0.5 percent. We believe,
however, that the Andropov regime will not want to
stem a trend that is seen as improving dietary quality
when inexpensive foreign sources of sugar are readily
available. Should Soviet planners decide to restrain
growth in consumption to the plan level, the overall
requirement would be reduced by about 1 million
tons.
Projections of domestic sugar production are difficult
to make, given the past variability in yields. Nonethe-
less, past trends provide some clues to the causes for
flagging output of refined sugar from domestically
grown beets. They suggest declining sugar content
related to inefficient harvesting, transportation, stor-
age, and processing.' If weather conditions are aver-
age and the Soviets revise cultural practices to raise
yields and enhance the sugar content of beets, as well
as provide better transportation and handling facili-
ties, the slide in sugar production could be reversed in
the latter 1980s.
Many of the improvements needed-specialized har-
vesting, cleaning, and handling equipment; adequately
ventilated storage facilities; timely transportation; and
upgraded processing plants-have been promised for
1981-85. During this period, Moscow plans to invest
1.5 billion rubles in the sugar industry, about 10
percent of total investment in food processing. In
addition, beet farms are to receive substantially more
fertilizer, pesticides, tractors, beet harvesting equip-
ment, and other machinery. The planned investment,
together with better management and favorable
weather, could raise Soviet production of sugar from
domestic beets to about 10 million tons in 1990.
Without these changes, however, output at the end of
the decade could be little changed from the levels of
the last few years.
' Since 1975, the sugar content has fallen by an estimated 1.5
percentage points. Every percentage point drop in sugar content
costs Moscow roughly 700,000 tons of sugar. If this trend were to
continue, the Soviets could lose another 1.1 million tons of sugar by
1990. Meanwhile, 15 percent of potential
sugar output is lost because of antiquated andling and processing
facilities. New investment under the Food Program could eliminate
Even under a scenario of relatively high production,
the Soviets would need to import large amounts. of
sugar in the late 1980s. The USSR probably will
continue to import at least 3 million tons a year on
average from Cuba. Imports from other sources are
likely to range from perhaps 1 million tons to 2
million tons or more, depending on policy and market
considerations. If the Soviets are unable to turn their
sugar production around, non-Cuban imports could be
as much as 2 million tons above current levels.
The Sugar Lever-A Political Perspective
Moscow's attempts to play its sugar card will depend
on (1) the perceived political benefits, (2) Soviet supply
and demand for sugar, (3) relationships with existing
suppliers-particularly with Cuba, which enjoys a
special place in any calculation of the Soviet sugar
balance-and (4) Soviet ability to pay for sugar
imports either in convertible currency or in goods
acceptable to sugar exporters.
Moscow's ability to move among suppliers in the
sugar market carries with it a potential for creating
political gains from commercial transactions borne of
necessity. The fact that it can simultaneously buy
sugar and political good will apparently has not
escaped Moscow's attention (see inset, "A Case for
Political Purchases"). Nevertheless, Soviet exercise of
economic leverage for political purposes has always
been cautious-restrained by a realistic assessment of
the limits of such leverage and by the desire not to put
at risk assets already in hand.
The extent to which the USSR plans to take advan-
tage of opportunities to use sugar as a policy lever is
not known. However, for the LDCs the prospect of
large Soviet sugar purchases takes on increased im-
portance in a glutted market (see figures 5 and 6).
Even relatively small Soviet purchases are helpful at
the margin for financially strapped LDCs.
In the case of new leftist-leaning regimes, such as
Nicaragua, for example, the ability of the United
States to hurt the Nicaraguan economy by reducing
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Although most Soviet sugar deals are transacted in
normal commercial fashion, reflecting primarily sup-
ply and demand conditions of the sugar market, some
seem to exhibit astute political timing by Moscow or
a convergence of political and economic interests.
During the past eight years, Soviet sugar purchases
from Peru, for example, occurred in only two years-
1975 and 1980. In both of those years, there was a
change in Peru's government. Although there is no
evidence as to Moscow's motivation, it seems unlikely
that the timing of the sugar purchases was coinciden-
tal with these major political events. They may have
been linked with earlier Soviet arms sales.
Zimbabwe is another case in point. The only recent
Soviet sugar purchase occurred in 1980, the first year
of independence. Moscow, which had backed the
losing faction in the civil war, apparently felt the need
to make a goodwill gesture toward the Mugabe
regime by trying to improve trade relations. Certainly
the small amount of sugar it purchased-15,000
tons-could have been acquired more conveniently
from another supplier, given Zimbabwe's deteriorated
transport system after the war. Moscow's gesture
its sugar import quota from 53,000 tons to only 5,400
tons has been defused by a standing offer from
Moscow to purchase any unsold sugar resulting from
this sanction,
To
the extent that leftist-leaning countries believe a trade
weapon is being used by the United States or its
Allies, Moscow can play on that fear. In most cases
the Soviets can provide, if they desire, a guaranteed
market, underwriting a portion of a country's econo-
my as they have in Mozambique.
In dealing with sugar-surplus countries that also have
serious economic problems, Moscow, by providing a
market for their sugar, could buy some political good
Although no price was specified, the Soviet Union presumably
would buy this relatively small quantity of sugar at the US quota
price, which is about double the current world market rate.F__
apparently had little impact, however, as Mugabe did
not establish diplomatic relations with the USSR
until March 1982 and political ties remain generally
cool.
As for other examples, the only Soviet sugar pur-
chase from Guyana occurred in 1975, the same year
that Moscow's first resident diplomatic mission ar-
rived in that country. The Soviets first purchased
Nicaraguan sugar in 1980, just after the current
leftist regime came to power.
Moscow's opportunism may also be reflected in the 25X1
Soviet response to the imposition of smaller sugar
import quotas by the United States in May 1982. A
country-by-country comparison of decreases in US
sugar imports during 1981-82 with increases in Sovi-
et sugar imports in the same period shows a degree of
correlation between the two. While the timing of the
Soviet response may be purely coincidental, related
more to Soviet needs for sugar, in some cases-
particularly Thailand and Nicaragua-the virtually
identical offsets suzzest that politics may have played
a role.
will. Such transactions would be unlikely to change
the basic position of a regime, but they could soften it.
In Guyana, a country whose economic prospects are
deteriorating rapidly, a Soviet offer to take a large
quantity of sugar could help improve a relationship
that has been lukewarm. Moscow would be likely to
play up the fact that the United States, in contrast,
reduced its Guyanese sugar purchases by some 35,000
tons when it imposed a sugar import quota system in
May 1982. The quota system reduced total US
imports from an average of 4 million tons to 2.8
million.
Moscow could also use sugar purchases to influence
countries squarely in the US camp. In the case of
Thailand, the US import quota system has come at a
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Figure 5
Selected Countriesa: Sugar Export Earnings as
a Share of Total Exports, Average 1978-81
Cuba
Mauritius
Fiji
Swaziland
Dom. Republic
Guyana
Barbados
Malawi
Panama
Philippines
Jamaica
Guatemala
Thailand
Costa Rica
Brazil
Figure 6
USSR: Sugar Import Shares, 1982
Other 5.0
Australia 2.0
Argentina 2.0
Dom. Republic 3.0
Philippines 3.0
Brazil 5.0
Thailand 6.0
EC 17.0
I
time when Bangkok has undertaken a spectacularly
successful export diversification program. Thailand's
sugar exports nearly doubled in 1982, making sugar
the third leading export earner after rice and tapioca.
While the US sugar quota reduced purchases from
Thailand by nearly 200,000 tons, the USSR boosted
its Thai sugar purchases by more than 160,000 tons
(see table 4). A mid-1982 trade agreement between
Bangkok and Moscow, which calls for an expansion of
bilateral trade and the setting of trade targets, could
provide the basis for a long-term Soviet sugar pur-
chase. Thus far, this has, not occurred.
Other targets of opportunity may include such non-
aligned states as India, Argentina, and Peru. While
the sugar lever is not powerful enough by itself to pry
any country off the fence, Moscow could, neverthe-
less, use sugar purchases together with other incen-
tives to nudge a regime in its direction. Moscow may
find India a particularly attractive target. With rec-
ord production the last two crop years and a small
export quota, India finds itself with rapidly mounting
supplies of unsold sugar. New Delhi has said it plans
to petition the International Sugar Organization
(ISO) to raise its export quota by 50 percent, to 1
million tons, as well as to increase its own buffer stock
from 500,000 tons to 1.5 million. Unless India's
domestic production policies are changed, however,
these actions will provide only temporary relief. An
offer by Moscow to take a large quantity of sugar,
perhaps bartering oil in return, might prove difficult
to refuse.
Moscow's strategy in the international sugar market
may indeed be affected by whether it can arrange
such barter deals rather than pay for sugar imports
with hard currency.' For example, the Soviets may
attempt to barter various types of machinery which-
despite the generally inferior quality by world stand-
ards-may be attractive to sugar-producing LDCs
already facing large international debts and a glutted
market for their primary export. The USSR's own
hard currency position may be much tighter by the
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Table 4
Comparison of US and Soviet
Sugar Imports From Selected Countries, 1982
Changes in
US Purchases a
Changes in
Soviet Purchases b
Total
-2,008
545
Brazil
-564
15
Australia
-567
157
Dominican Republic
-185
180
Argentina
-284
-23
Philippines
147
-65
Thailand
-190
163
Colombia
-128
24
Guatemala
-58
64
Swaziland
-107
Panama
- 25
Zimbabwe
-84
Honduras
-57
-35
-48
Nicaragua
-4
5
Costa Rica
-15
Mozambique
-10
25
47
115
South Africa
64
a Maximum imports allowed by 1982 quota compared with actual
1981 imports.
b 1982 imports compared with 1981 imports.
late 1980s, forcing Moscow to stress barter agree-
ments. Such agreements would be consistent with
current Soviet efforts to expand exports, especially to
those countries where it is currently incurring large
trade deficits such as India, Brazil, and Argentina.
In contrast to direct sugar purchases, the USSR
probably will not find its membership in the ISO of
much benefit in wooing LDC sugar exporters. Thus
far, it has maintained a low profile in negotiations for
a new international sugar agreement to replace the
one that expires in December 1984. The USSR has
generally refrained from playing politics in the ISO,
except in protecting its special relationship with Cuba
(see inset, "New Sugar Agreement-A Placebo"). F
The highly politicized nature of domestic sugar mar-
kets and world sugar trade has been an additional
complicating factor in a broad range of political and
economic issues such as North-South and East-West
relations, the debt problem, and global trade barriers.
The United States, as the world's largest sugar user,
can expect to be buffeted from all sides:
? LDCs. They will cite cutbacks in US sugar imports
as a primary cause of low sugar prices and their
effect on export earnings. LDCs may attempt to link
at least a portion of their debt problems to reduced
sugar incomes in negotiations with the United
States.
? The European Community. The EC is likely to try
to capitalize on its lead role in formulating a new
sugar agreement, especially if it agrees to cut its
sugar exports. The EC and other sugar producers
are likely to shift the blame for the depressed sugar
market to US sugar import quotas.
? The USSR. The Soviet Union's capacity to absorb
large quantities of sugar can be used by Moscow to
negate US sanctions involving sugar purchases.
Large Soviet sugar purchases-as high as a million
tons in a single day-often concealed through Lon-
don sugar traders, create additional uncertainty in
an already volatile market.
How the USSR will play its hand in the ISO and with
the LDCs is uncertain. Moscow does not hold all the
cards, however. In the longer term it is somewhat
constrained by a shortage of hard currency and a lack
of salable export goods. Moreover, its course of action
will continue to be influenced by the size of future
Cuban sugar crops as well as its own. Nevertheless,
the recent shift in Soviet sugar import needs, while
creating additional foreign exchange pressures, pre-
sents Moscow with an instrument of influence that it
certainly will not ignore.
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New Sugar Agreement -A Placebo
The major sugar producers are negotiating a new
sugar agreement to replace the current one, which
expires in December 1984. Negotiations have cen-
tered on the type of regulatory mechanism needed to
keep prices in a range acceptable to producers and
consumers. The European Community is pushing to
eliminate most export quotas, substituting a large
buffer stock instead. Past agreements have relied
almost exclusively on export quotas to apportion
sugar market sales, with special stocking arrange-
ments playing only a minimal role. None of the past
agreements has been successful in keeping world
sugar prices in the desired range, nor have they had
any effect on curbing oversupply.
Most sugar exporters consider it crucial that the EC
become a party to any new agreement. A 5-million-
ton exportable sugar surplus makes the EC a potent
force in the world market. The EC knows this and
has, thus far, been calling most of the shots during
the negotiations. The Community's controversial pro-
posal, which would lift all quotas for the 10 largest
exporters and require importers to help finance a 6-
million-ton buffer stock, dominated the sugar talks in
Geneva in May. Although no agreement was reached,
the talks ended on an optimistic note with most
parties demonstrating some willingness to compro-
mise. An informal consultative group met in July in
an attempt to narrow, if not resolve, most of the
differences over the type of regulatory mechanism to
be incorporated into a new agreement before formal
talks resumed in September.
At the July meeting the chairman of the special
group, Jorge Zorreguieta of Argentina, tabled a
compromise proposal that would make greater use of
stocks than in the past but would continue.to use
export quotas-called reference export availabilities
(REAs)-to control free market sugar supplies. Al-
though the compromise proposal was generally well
received, key countries are still reserving their official
positions. French authorities have since voiced strong
objections to this "watered down" version of the EC
stocking proposal. Support by France, which accounts
for about 60 percent of the EC s annual sugar
surplus, will be critical to any EC decision to ratify a
new sugar agreement.
Other stumblingblocks to a new agreement revolve
around the special arrangements accorded sugar
trade between the EC and the African, Caribbean,
and Pacific producers and Cuba's sugar trade with
the Bloc countries. Neither is limited by export
quotas under the current agreement. A proposal by
Australia to include substitute sweeteners traded
internationally in any new agreement has been op-
posed by the United States and others.
It now appears that a new agreement will be ham-
mered out, if not this fall then early in 1984.
However, because of the compromises that will prob-
ably have to be made to satisfy the disparate interests
of exporters and importers, developed countries and
LDCs, East and West, and so forth, any new agree-
ment is likely to be ineffectual.
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Appendix
World Sugar Statistics
Table A-1
World Raw Sugar Production, Consumption, and Stocks
Production
Consumption
Stocks
Stocks as a
Percentage of
Consumption
1975
81.6
77.3
32.6
42
1976
86.6
82.0
36.7
45
1977
92.0
84.9
46.3
55
1978
90.8
86.2
45.3
53
1979
89.2
89.9
43.2
48
1980
84.6
87.9
39.6
45
1981
92.6
88.7
41.1
46
Table A-2
World Raw Sugar Production, by Region
Region/
Major Producer
1975
1976
1977
1978
1979
1980
1981
1982
World total a
81.6
86.6
92.0
90.8
89.2
84.6
92.6
100.7
North America
6.1
6.6
5.9
5.3
5.6
5.4
5.9
5.5
United States
6.0
6.4
5.8
5.1
5.4
5.3
5.8
5.4
Central America
12.3
12.5
13.3
14.3
14.3
12.7
13.7
14.3
Cuba
6.4
6.2
7.0
7.7
7.8
6.8
7.9
8.0
South America
11.3
12.5
13.9
12.9
12.1
13.3
13.7
14.1
Brazil
6.3
7.2
8.8
7.9
7.4
8.3
8.7
8.9
Western Europe
13.7
14.3
16.2
16.5
16.6
16.7
18.8
19.6
European Community
11.1
11.2
12.8
13.2
13.6
13.5
15.5
15.7
Eastern Europe
13.2
13.3
14.4
14.9
13.5
12.0
12.1
12.5
USSR
8.2
8.5
8.9
9.4
7.9
7.2
6.4
7.0
Africa
5.2
5.5
6.0
6.1
6.2
6.0
6.5
7.0
South Africa
2.0
2.1
2.4
2.3
2.1
1.8
2.0
2.4
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Table A-3
World Raw Sugar Consumption, by Region
Region/
Major Producer
1975
1976
1977
1978
1979
1980
1981
1982
World total a
77.3
82.0
84.9
86.2
89.9
87.9
88.7
91.9
North America
10.2
11.0
11.5
11.1
11.0
10.3
9.9
9.4
United States
9.1
10.0
10.4
10.0
9.9
9.3
9.0
8.5
Central America
4.2
4.3
4.4
4.7
4.8
5.0
5.1
5.5
Cuba
0.5
0.5
0.5
0.6
0.5
0.5
0.6
0.6
South America
8.8
9.0
9.2
9.4
10.3
10.7
10.3
10.4
Brazil
5.0
5.1
5.1
5.3
6.0
6.3
5.9
6.1
Western Europe
13.4
14.9
14.4
14.9
15.0
15.0
14.6
14.6
European Community
9.8
11.0
10.2
10.9
10.8
11.0
10.6
10.6
Eastern Europe
16.6
17.3
17.4
17.8
17.9
17.8
17.9
18.7
USSR
11.3
12.0
12.0
12.1
12.2
12.3
12.5
12.6
Africa
5.1
5.3
5.9
6.3
6.5
6.9
7.5
7.3
South Africa
1.2
1.3
1.3
1.1
1.1
1.3
1.3
1.3
18.1
19.3
21.2
21.1
23.3
21.2
22.3
24.7
India
3.9
4.0
4.2
5.2
6.7
5.0
5.4
6.7
Oceania
1.0
1.0
1.0
1.0
1.0
1.0
1.0
1.0
Australia
0.8
0.8
0.8
0.8
0.8
0.8
0.8
0.8
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Table A-4
Raw Sugar Production of Selected Countries
Thousand metric tons
Argentina
1,367
1,559
1,666
1,397
1,411
1,716
1,624
1,563
Australia
2,930
3,395
3,452
2,978
2,961
3,415
3,509
3,652
Brazil
6,299
7,236
8,759
7,913
7,362
8,270
8,726
8,941
Canada
120
156
155
123
133
92
99
129
Colombia
970
935
853
1,014
1,107
1,247
1,212
1,318
Dominican Republic
1,170
1,287
1,258
1,199
1,200
1,013
1,108
1,285
European
Community b
11,126
11,164
12,752
13,170
13,613
13,545
15,476
15,724
El Salvador
244
261
318
279
274
217
182
199
Gabon
NA
0
5
8
10
12
15 c
15 c
Guatemala
384
517
487
446
415
452
474
580
Guyana
311
343
253
342
316
286
320
305
Mozambique
260
220
320
190
212
170
178
126
Nicaragua
210
242
226
222
202
190
214
247
Peru
964
930
900
856
695
537
478
650 c
Philippines
2,672
2,984
2,624
2,273
2,390
2,332
2,376
2,709
Swaziland
224
226
238
257
258
328
368
402
Thailand
1,216
1,757
2,361
1,664
1,981
778
1,702
3,017
United States
5,955
6,438
5,764
5,133
5,435
5,313
5,789
5,418
Zimbabwe
257
NA
316
324
314
358
391
401
Cuba
6,427
6,151
6,953
7,662
7,800
6,805
7,926
8,039
USSR
8,200 c
8,500 c
8,885
9,353
7,927 c
7,250
6,413
7,000 c
a Countries that export to the USSR.
b Including Greece.
c Estimated by the ISO.
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Table A-5
Raw Sugar Exports of Selected Countries a
Argentina 197
293
958
367
351
484
709
338
Australia 1,976
2,621
2,965
2,002
2,003
2,411
2,982
2,504
Brazil 1,730
1,252
2,487
1,925
1,942
2,662
2,670
2,788
Canadab 86
54
145
136
120
14
138
97
Colombia 198
100
0
132
278
280
177
293
Dominican Republic 975
999
1,117
937
1,035
792
864
850
European Community c 702
1,903
2,751
3,587
3,621
4,325
5,344
5,580
El Salvador 140
130
169
133
164
35
49
56
Gabon b 0
0
0
0
0
0
7
0
Guatemala 204
321
294
153
195
210
228
218
Guyana 295
306
218
295
280
263
282
265
Mozambique 72
147
208
36
80
64
63
28
Nicaragua 89
153
102
104
111
69
89
97
Peru 422
284
412
266
181
53
0
69
Philippines 1,006
1,515
2,575
1,142
1,157
1,793
1,278
1,301
Swaziland 201
209
211
226
236
317
345
344
Thailand 668
1,145
1,675
1,029
1,210
460
1,155
2,045
United States b 203
69
20
20
14
587
949
49
Zimbabwe 116
NA
159
142
256
219
164
229
Cuba 5,744
5,764
6,238
7,231
7,269
6,191
7,071
7,734
Countries that export to the USSR.
b Net importer.
Including Greece.
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