4*9 ERM69

LWRTAT IOA'T. a ,nT, FO 7 SECO TSt ThJIOIT & DU

RESEARCH =AR7T;2EITT

SUGAR

(A Brief Review of Tlrendsin Production, Trade and Consumptiozn)

Economic Resources and Markets Staff

Prepared by: Paul F. Craig-Martin

Approved by: Joserh S. Gouald dEMs 2February 18, 1948 CCPY: 22

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TABT OF' 0O ONTNTS

Summary.

Pages

I. Production and Trade 1 _ 9

II. Consumption. 9- 10

III. Prices. 10- 12

IV. Future Trends. 12 - 16

TA3I;ES

World Production of Sugar,

World Trade in Sugar, Group I - Preference Systems.

World Trade in Sugar, Group II - Pree Market.

Sugar Production, Trade and Consumption, Prewar.

Sugar Production, Trade and Consumption, 1946/47.

Estimated Sugar Consumption.

Raw Sugar Prices,

CHARTS

Estimated World Production of Cane and Beet Sugar.

World Trade in Sugar.

Raw Sugar Prices.

SUGAR

(A Brief Review of Trendsin Production, Trade and Consumtion)

SUMMARY

1. Sugar is obtained on a large scale from two plants only: sugar

beet and sugar cane, The two plants do not compete for the same soilg.

2. No distinction is made by consumers between refined beet and cane

sugar,

3. Beet sugar can only be produced with assistance (e.g. subsidies)

because its costs of production are higher than those for cane sugar. As-

sistance to beet sugar industries is granted for numerous political and

economic reasons, not least of which is the fact that sugar beet cultiva-

tion forms a valuable part and is integrated with the whole farming system

in producing countries.

4. Direct competition of beet sugar with cane sugar on world markets

has been possible because beet sugar producing countries have been eble to

recover losses on exports from their 'Large domestic markets. Indirect com-

petition of beet sugar with cane sugar has tak-en the form of a spread of

sugar beet cultivation, under the urge of economic nationalism, with a re-

sultant reduction in world markets.

5. The growth of preference systems since the beginning of the twen-

tieth century has brought about a marked reduction in true international

trade and concentrated the struggle for world markets among "independent"

beet and cane sugar exporters.

6. E.xport prices vary for countries enjoying preferential markets and

those without such markets: export prices within preference systems vary

from each other,, However, all such prices are inter-related through world

prices determined on the free market. In 1934, prices within the United States

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preference system were largely divorced from world prices by the alloca-

tion of export and production quotas between members.

7. In 1937, an International Sugar Agreement was signed by all the

main importing and exporting countriest the chief provision was the limita-

tion set to the growth of preferential production and exports in relation

to the free market.

8. World War II upset the eqtilibrium established in 1937 by the sus-

pension of the relevant provisions, although the Agreement was extended until

31 August 1948.

9. The current foreign exchange situation has aggravated the long term

problems of the independent sugar exporters by extending preference systems

from the old tariff areas to wider groupings on the basis of exchange and

trade relations.

10. Futzre trends in production will be upward, with a recovery in

European sugar beet production relatively faster than for other creps and

quick rehabilitation in the Philippines; recovery in Java will be slower;

a full return to prewar levels is unlikely in Pormesa, Future trends in

consumption also will be upward with the recovery of demand in war affect-

ed areas.

11. After recovery, potential increases in sugar production, on the

basis of both area and yield, are considerable but are relatively greater

for cane than for beet sugar. Potential increases in sugar consumption are

appreciable but are relatively greater for underdeveloped than for more ad-

vanced countries. However, increases in production are relatively faster

than for consumption and surplus positions, as in the past, are likely to

occur.

12. The world price of sugar, which has been increasing since 1932*

has probably passed its peak. In many countries current prices barely cover

costs of production. Consequently, profits must be increasingly sought in

the full utilization of by-products, particularly of cane sugar production.

SLTJ C-AR

Sugar is obtained on a large scale from two plants onlys sugar

canle a nerennial plant of tropical anad sifo-tropical zones, and. sugar beet,

a *biennial plant of the temper.te zone, The two plants do not cor.mfntete fo

the sczme soil.

Raw sugar is extracted from 'both cana an.l beet in factories located

near the source of the raw material, consequently, neith.ler cane nor beat are

transported over long distances. 'Usually, refined beet sugar is obtained

from a continuous process in t,le same factories extracting raw suagar 0 On

the other hand, raw cane sugar is translorted {from the tropical prodlcing

countries to consuring ccuntries where it is refined;, Only a very small nor-

tion of refined cane sugar enters into primary trad.e 'but, there is a consider-

able secondary trad.e.

No distinction is made by consumners betw.!een refined beet and cane

sugar,

I. Prrduction and Tra.de

'Jorld prodluction and. trade in sugar is still end.eavouring to rt.i-

just itself to a new pattern, althoueh the period of adjustment has already

lasted ever a hundred years, 'Jith the economic value given to thle earlier

discovery of sucrose in b)eets by the Kapoleonic Irars the stege was set for

the long struggle betwteen beet sugar and the older cane sugar. This struggle

has been complicated by imperi.alJ preference systemn;s 0 Thus the main problems

for the sugar world., problems which have not yet been fully resolved, are:-

(a) The necessary adjustments by all cane s,.L proJucers to

(1) the competition of beet sugar on world markets, and(2) the narrowing of mrarkets caused.'L b the spread of beet sugar

production, anLd

(b) The necessary adjustments by independent cane sugar producers to

the further narrowing Df m' c-u.- rl,r + A '- dtedy growth of preference

system- a,. c-Stczl unzior,.

The inevitability of the need for these adjustments has been con-

cealed by two main factors, firstly, the long term rising trend in consump

tion of sugar, mind, oecond.l1,r the incidence of wars.

Ir order to assess the progress made in these fund.amer-ta1 adjust-

menets and th'e pi rospects for the future it is necessary to review past devel-

opments, w.,hich, althiough conti-nuous, fall conveniently into three pariods.

3>ui.nga this -oriod the first of the problems of adjustment, i.e,

direct competition of beet and. cane sugar for wcorId.markets, was domninant.

Competition grew wit'h the rapid expansion of beet sugar -roduction:-

Beet Sugarin

'Ucrld S- ar Pro-OuctionPercent

1852153 14,019C1/02 54 ' 4

TEhis vast increase in beet sugar preduction resulted in a rapidly

mounting exort surplus, particularly as over 90 oercent of the world beet

sugar output was concentrated in oinly seven countries. Production in these

countries in 1901/02 together with e:nort surpluses was as follows:-

Season 1901J02Beet Sugar Production Bx>rts*

(thous. m.letric tons) (thous. metrictons)

Germany 2305 1272Ausstria/1 /Xungary 1302 836France 1123 535Netherlanids 203 277B el>i um 325 192FLRissia o1076 l50

Total seven countries 6,3-34-. 22* Including refined cane sugar, particularly

for France and the YTetherlands.

Five main factors contributed to the rapid rise of the beet sugar

industry in E:urope during the nineteenth century. They were:-

(a) State Aid - Thcouragement of beet sugar production twaspartJly due to the fact that beet cultivation promoted the progressof farmirng in general. Assistance took various forms as -Ifollows:

(a) Duties on raw sugar based upon an assumei ratioof extraction of refined sugar, enabling a propor-tion to escap>De taxation,

(b) Direct subcsidies or premium.s on sugear proLuced.,(c) Preferential scales of imnort dutieso(d) Differentia.al scales of im-oort duties on raw and re-

f i:Led.(e) Dr-a-TIac'-s of duty on e ::orts greater thani duties

paid.,(f) .Dxirect bounties or. exports,

(b) Carteli.zaton - In the second half of the nineteenth centurysugar manufacturers rn Germany ancl Austrira ba-nded themselves intocartels, wlhich forced u-c the price on home markets as high as theimport duties allcwved and. enabled t1hem to dum.p hnuige suroluses onoverseas markets at very- low prices.

(c) Abolition of Slave.x - Between 1825/1880 Euronean governmentsabolished sla?erw.7 in their American colonies, There was an immed-iate and prolonged. shortage of labor in these cane sugar producingareas, which broug:ht some to the verge of ruin0 Xt took twrenty tothirty years in most cases to readjust to free labor.

(d.) Pritainls Tariff Policv - `ritain, by far the largest con-sumer of sugar, abolished preferential tariffs for Em-oire suppliesin 1654 aand all import dluties by 1874- Import duties were not re-introduced (until 1901 and Empire preference did not return until 1919.

(e) Raoid Increase in Consumotion - The setback to carne sugarproduction by the abolition of slavery reduced the competition whichhad to be met by beet sugar, and, in conseeuence, it took- full ad-vantage of the rao.id increase in world consurmtion Cvane sugar pro-duction iincreased. at the same time but its !rrowth was retarde& bythe difficulties of the induastry in the Amiericase, -etween 1852' and1902 world production of beet and. cane sugar in2creased from. 15 to10,9 million tons. The vast expansion iln production was fully absorb-ed as a result of the loW exort prices ocssible throagh State Aidand Cartelization m.easares. The follovi:y: figures illustrate therise in consumption ana the fall in orices:-

Arere--tage AverageUnited i I'.om Th5ib9 1803

Average import price: raw per cwt, 42s 4d 21s 2d,Refined per cwt, 57s Od 28s 6dConsumption per head 31 lbs. 65 lbs.

The bounty system under which the growth of European exports of

beet sugar made such remarka-le progress had overcome all resistance during

the last half of the nineteeinth centu=y. With the turn of the centur,y, how..

ever, the plight of the American colonies caused considerable anxietyr to

the GoveriLments of the day. Furthers European ex)qorting countries were be-

coming perturbed 'ry the spreadin, practice of imposing couiztervailMlog duties.

Bounties rose, countervailing dulties increased, Eurooean dom.1estic sugar

prices rose, export prices fell and foreign exchequers were filled,

On 5 March 1902, Gerlnmamny, Austria, Belgium, S;fJn, France, Great

Britain, Italy, the Yetheolands, Sweden and 1Torway agreed at a convention

in Brussels to the abolition of all direct and indirect bcunties on pro-

duction and exports of sugar. Peru, Switzerlancl and Luxembourg joinied the

Convention in 1907 and Russia in 1908. The Convention originally lasted un-

til 1908 but was given further operating life until 1918.

(2) 902 tLL_9-Z

The Oonvention put an end to the growing pressure to export below

costs and the direct cut-throat comnetition between beet and cane su,ar for

world markets. -man governments took the opportunity to lower excise taxes.

Germany, France and Belgiu=m made considerable tax reductions and, with

greatly reduced domestic prices, consumption in those countries advanced

rapidly. Th7e consequential reduction in exports, particularly to Great

Britain, gave considorable assistance to the recovery of cane sugar. Great-

er confidence in tJhe future of cane sugar developed and brought a Lreer in-

vestment of canital in the ca*ne areas, which in turn brought moclernization

and improved eff iciency.

The United States was not a party to the Brussels Convention and

had begun as early as 1876 to create a preference area, granting free imports

to Hawaiian sugar. In 1901 free trade vwas extended to Puerto Rico; prefer-

ential duty was accorded Cuban sugar in 1902; partial preference was given

- 5 -

to the Philippines beginning in 1903 until free entry was allowed in 1913.

This new preference systems with its center the United States, absorbing

nearly 37 percent of world imports, greatly narrowed the true international

Thus, the stage was being set, before the outbrea'k of World War I,

for the rise to prominence of the second problem of adjustment in the sugar

world, i0e0 , the narrowing of markets owing to the growth of oxeference sys-

tems and customs uwions.

T"he only large open market in 1914 was the United Zingdom, which

took 24 percent of world imports. With the normal sources of the bulk of

imports of suLgar cat off by hostilities, the Un-ited -in ,cm became acutely

conscious of the extremely s;.all share of her sup-plies -,)rovided by Empire

countries. In 1914 only 7.6 percent of tctal imrports were from Empire sources.

In 1916, the British 7rmpire Producers Association was formed with the avowed

object of making the British Empire self-sufficient in sugar. A question-

naire sent to Empixre governments showed that current production fell short

of self-sufficiency byr two and a half million tons. The idea of self-suffic-

iency gained ground and the United Kingdom formally withdrew from the Conven-

tion agreement on its expiry in 1918. In 1919 Britain re-introduced Empire

preference: further, a start was made with a subsidized beet sugar industry.

Tn the years immediately fclcw!irn- World W#rar I the emansion of

sugar production and ccnsumption in all parts of the worlcl was remarkable.

The portion of the world total accounted for by preference systems rose from

35 percent to 44 percent in the same period. Eyt the middle twenties pro-

duction in the British preference system reached nearly double the prewar

level, The United States system also doubled its output.

Although beet prc.(.uction by 1924 was at about the same level as in

1909/13 it accoun.ted for only 33 percent of total world sugar production

compared with 45 percent in the prewar period. The comnetitive position of

-6-

beet sugar was fundamentally changed; intensive use of labor, at highi wages,

increased costs of production well above the levels of tropical cane pro-

cucers. At the same time a considerable increase in efficienc- had been

achieved by cane producers.

'ith the quick recovery of $uropean beet production world supplies

rapidl- overhauled requirements. As a natural consequence protectionist

policies were increasingly pursued by beet sugar producers. These left the

independent cane producers in a difficult pCsition, as colonial cane produc-

ers had assured markets for the bulk of their export supplies. High cost

cane producers, such as South Africa and Australia, and beet producers of

Europe relied mainly on their domestic markets and losses from exports of

surplus sugar could be made good from such domestic markets. The large ipv

dependent cane producers, however, hacl relatively small domestic markets.

By 1927 prices had fallen to the prewar level and all signs point-

ed to further reductions, Cuba, only partly under the Uinited States umbrella,

was hardest hit and attempted unilaterally to restrict production. However,

conditions worsened with the growing policy of economic nationalism under

which beet sugar cultivation spread and export markets for sugar dwindled.

American banlers, who were largely committed in Ouba, becane anxious and

engaged Thomas Chadbourne to try to bring about a restriction of production

and a reduction of the huge surplus stocks.

On 11 May 1931, again at Brussels, an agreement, known as the Chad-

bourne Plan, was signed by Cuba, Java, Czechoslovakia, Poland, Hungary and

]3elgi=. Signatories were to restrict -oroJuction and exports. The plan had

a life of five years and vwas in its course joined by Peru and Yugoslavia.

An International Sugar Council was established for the exchange of inform-

ation.

- 7.

The specific purpose of the American bankers, the thawing of froz,

en credits to Cuba, was accomplished but the world situation was not reliev-

ed. Cuban prices f.o.b. quoted in London fell from. 1.16 cents in 1930 to

0.82 conts in 1934. A continued decline in imports into India and China

left Java with much reduced marlkets, Further, the sacrifices of the parties

to the plan were more than offset by increased production among non-signa-

tories.

No system of tariffs could insulate against the effects of the

world sugar depression. Producers within preference systems we,re conse-

quently faced with ever dwindling prices. Under pressure from producers

the United States passed the Jones-Costigan Act, 1934, subjecting imports

to a quota system. Thus, by regullating the total ouantity of imrports and

continental production, domestic p3rices w.ere elevated and largely divorced

from world prices. The im^portance of this can be measured by the fact that

in 1934 the United States accQunted for 42 pez'cent of world imports.

These development,s since the Brussels Convention had, by the begin-

ning of the second half of the thirties, concentrated the lorg term problems

of cane sugar producers. Direct competition wit'h beet sugar, although strong,

was no longer acute but the increasing spread of sugar beet cultivation un-

der economic nationalism was narrowing markets for both cane and beet. Pre-

ference systems were absorbing growing shares of available mar'-ets. Con-

sequently, the indeoendent cane sugar exporters, whose whole economies de-

pended so largely on their sugar industries, were seeing the steady destruct-

ion of those industries.

On 6 May l137, all the main importi.ng and e,porting countries joined

in signing an International Sugar Agreement., Th1c; Agreement consolidated ex-

isting regulations of world trade in sugar through quotas, tariffs and pref-

erence systems. The free market was determined and shared out under a series

of international export quotas,

Thus, a second great landmark was reached in the development of

the world trade in sugar. The Brussels Convention of 1902 had rationalized

the comnpetition betw;een beet and cane sugar. The International Sugar Agree-

ment of 1937 set a. relative limitation to the expansicn of preference systems.

The changes in the relationships between preferential and indep,:nd-

ent producers ane. the importance of preferential marklets can be seen frcm

the follow-Aing figures:-

Preference S.,-stems within Wo,rld TotalsProduc-tton xrts InQ ortsPercerit Percent Percent

Average 1909113 35k4 50C,4 71.4It 1-,li?9I? 3, g 63,2 70.4

9 1929- 3 L3>,5 67,9 720319371 45;2 75.9 3o84

(,) 1937 to Date

The outbreak of World. War II just two years after the 1937 Agree-

mnent was concliided provided too short a period in which to judge the prob-

able effects of the scheme. Durxing the war the eouilibrium envisaged in

1937 was abandoned ancd a marked expansion in Cuban ex?ports occurred,,

Since the cessation of hostilities a new factor has been introduced

in acute horm - the shortage of foreign exchange. This has brought to the

forefront the importance of preference systems in a wider than tariff sense.

The 1937 relationship between nreferential azid independent producers, first

upset by wrartime chanwes, has been furt'her upset by the "dollar problemlt

and a new geographical groaping- must be male. The new groluping, on the basis

of an exchange and trade relationship, accentuates the problems of the inde-

penda:nt producers, These problems are assuming increasing- magnitude as the

shortage of -4,-tr g;xpnears.

The division of wrorld irade in Sug:t' under the )1d and new geograph-

ilcal groupings is pe- followo;-

Preference Systems within World TnotalsProd.uction EM'o Rts I rtsPercent Percent Percent

C id. lTew(a) Old NeTew(a) Old. "Tew(a)

Average 1934/38 418 55,8(b) 74s6 77.8 75.4 7701Season 1946/47 55,5 61.8 8702 8705 0ol 86.8

(a) Cuba, USA and Territories, British Commonwrealth andEmirpire, Duich,, French, Belgian and Portuguese Empires.

(b) Average 1935/39 for non-European countries.

Consum-tio-a

Rates of consumption in different co Wuntries are due to a complex

of factors. Since lower age g,rou3ps are normal'y heavier sugar consumers the

age structure of a conlmtry t s population is an important factor, The s!reet-

ened condensed milk industry of the lNetherland.s and, Jam manufacture and

fruit preserving in the United Kingdom influence coiisunption in those coun-

tries. Dietetic habits are important also, as for example the consurmption

of fruit and wine in Mediterranean coLuntries, sw,,eets and soft drinks in the

UJnited States and strong tea in Australia.

Pz-haps thiae strongest single factor in:fluenciag consuimption has

been the tax policies of individual counatries. During the late twenties and

early thirties, when the world.d price for sugar was falling heavily, consump-

tion declined in many countries as domestic prices did not fall owing to

maintained or increasing taxation., The influence of taxation can be seen

from the following7 figures;--

Year 1936Consum'otion Retail Prices

Ibs. (r'aw) per head Cents per lb.

United Kingdom 109 4.6United States 104 5,6F:7ance 55 915J-3rmany 56 13,7I.T'aly 17 2l.8

The lon,g, term trend in consumption of sugar has been upward, Dur-

ing the period oi the great g;rowth of beet sugar production, consumption

- 10 -

made the most rapid strides. The advance in consumption in the United King-

dom during the nineteenth century is a remarlkable example:

Lbs, per HeadPer Annum

1815 15185f3 301880 601902 80

After the flood of cheap beet sugar had been stopped by the Brus-

sels Convention, the rate of increase in consumption slowed do-wn consider-

ably. However, as production continued to increase and trade was hindered

by war, consunption in exporting countries increased considerably. During

the twenties the general trend of consumption wras upward but, with a more

ra-oid rate of increase in proluction, stocks acowmulated, Consumption fell

heavily between 1931 and 1933 but then rose rapidly to reach a record level

by the outbreak of World lWar II.

During t*he war and the past two postwar years, consunmtion in

Europe and Asia fell away considerably owing to a s'hortage of supplies. At

the same time consumption in the United States and most other Western Hemis-

phere countries showed remarlable increases. Consequently, although sugar

production in 194-7/48 is estimated at only about 1 percent less than the av-

erage for 1935/39, consumption in Europe* is 25 percent less than prewar

and in Asia** shows a reduction of 40 percent. As soon as European and As-

iatic consumption levels return to normal world consumption will be appreci-

ably above thQ prewar figure and should resuime its upward trend, unless a de-

pression similar to that of the thirties occurs.

III. Prices

As cane sugar constitutes nearly two-thuds of the world production

of sugar the general level oL sugar prices tends to Be determined by cane

* Including USSR** Excluding guur in India.

w 11

sugar production costs. Since beet sugar is produced under conditions

which make for higher costs of production than cane sugar it can only be

produced at a profit with assistance. The tariff protection universally

given to the beet sugar industry secures sufficiently high prices on domes-

tic markets to enable manufacturers to export at world prices.

Free market sugar sets the world price. Suga_r enjoying nreferen-

tial treatment, such as that produced in the British Emp.ire, tends to sell

in the favored market at the world price plus the preference. Large export-

able surpluses consist principally of raw suoar, except for Java and Czech-

oslovakia, and the basis of 1.wrorld sugar prices is therefore that of raw sugar.

Since 1934 the United States market has, through its quota system,

divorced itself from world prices for sugar. The sugar supply is set under

the cuota system at an amount equal to the estimated demand. When the estim-

ate is conservative, the price of raw sugar rises, e.g,, 2.87 cents per lb,,

in 1934 and 3.62 cents in 1936.

Wholesale prices for refined sugar are determined by the world

price of raw sugar, plus any duties thmat may be imposed, plus the cost of

refining. The interest of refiners lies almost entirely in the refining

margin. 'Where there is a domestic beet industry the margin is affected by

competition at the home grown beet season when large supplies of white sugar

become available. At that season, in the United Kingdom, the selling price

of white sugar is often lower relatively to that of raw sugar. The selling

price of refined domestic beet sugar, in countries which import and refine

raw cane sugar, is thus determined by the world price of raw sugar, variations

in preference duties and the refining margin,

In most countries sugar is in fairly regular demand throughout

the year. In some countries, however, consumption shows a seasonal move-

ment. In the United Kingdom, for example, consumption increases in the sum-

mer owing to the additional demand for Jam and fruit prpserving.

- 12-

The history of world sugar prices has illustrated the effects of

bounties on beet sugar exports anri the narrowing of markets under prefer-

ence systems. At the beginning of the twentieth century world sugar prices

had been driven down below the level of costs for cane sugar. After the

Brussels Convention prices rose fairly sharply but by 1913 had fallen again

to little above the 1902 level. World War I brought increasing pr-ces but

by 1928 they resumed their downward trend reaching an exceptionally low

level in 1932. Except for occasional small setback4s prices have climbed

steadily since 1932 but the sup-ply and demand situation indicates that the

peak is probatly passed0

IV. Future Trends

(1) Production

Further increase in thie production of cane or beet sugar can be

brought about by the extension of the area under the orop or by increase

in yields.

Beet sugar production has been developed and maintained by tariffs

and subsidies and there is no doubt that were this protection to be with

drawn production would shrinkt considerably. However, cultivation of sugar

beet is integrated with the whole farming system of the -producing countries

and. it is unlikely that protection will be withdrawn. Current exchange dif-

ficulties will, if anything, increase the need for self-sufficiency and will

increase present acreages in Europe to at least the prewar level. The great-

est potentialities for an increased beet acreape lie in the United States

and the USSR, the formner being limited by the need to maintain cane product-

ion within the preference system.

Among cane producing countries, very considerable increases in

came areas are possible within the preference systems of the United States

and the British Emrire. Mowever, the main centers of production where an

- 13 _

expansion could take place within the British Empire (Australia, South

Africa and India) are all high cost producers. The greatest notential

areas for increased cane cultivation are among the independent producers,

particularly San Domingo. High costs, lack of capital and inadequate

transport facilities limit expansion in Brazil, Argentina, MIexico and

Haiti. Costs are low and efficiency is high in Peru but increased product-

ion depends on extended irrigation.

Recovery of production in the three cane producing countries of

Java, the _ahilippines and Formosa will not be uniform. In the Philippines

production and. exports are e.pected to attain prewar levels by 1950 but

in Java recovery will be slower, output probably not reaching prewar until

two or three years later. Recovery of production in Formosa is problemati-

cal. The sugar industry there was largely Japanese controlled and subsidiz-

ed, the Formosan taking little or no interest in sugar cane. China is more

likely to develop her own production in the south wvhere prospects are good.

Consequently, production in Formosa will probably not recover fully but,

at a guess, may reach 30 or 40 percent of prewar.

Sugar beets are produced by intensive methods so that cultivation-

al methods are generally advanced, high yielding varieties are in general

use and sugar contenlts approach the limits of increase. There are thus

comparatively small possibilities for increasing sugar beet yields. Pot-

ential yields are about 19 percent above the highest yet attained in the

field.

Yields of sugar cane vary widely between areas. Cult ivational

methods differ greatly from the extensive methods of Cuba to the intensive

methods of Java. The potential yields ol varieties of cane at present in

use are about Z7 percent greater than any yet reach,ed in the field. Thus

even if allowance is made for reduction of the cane yield to an annual basis

- 14 -

(about half) the yields of cane are much greater than beet. Further, most

cane producing countries are much further from maximum yields than beet

producing countries and increased yields can be more readily attained.

In 1944, the last of the mechanization problems for suagar beet

cultivation was overcome by the successful production of a machine for

thinning and harvesting. Thus all farm operations for beet can be mech-

anized. The degree of mechanization for cane cultivation is not so advan-

ced but satisfactory machines hXave Low been develoned to harvest cane of all

types.

If mechanization is inltroduced rapidly, particularly in cane

producing countries, serious technological umemployment will result. Con-

sequently the full use of cane by-products is becoming increasingly impor-

tant. The values wasted in cane to-)s, wrhich can be siloed for livestock

feed, are enormous. During the war a considerable portion of the crop,

particularly in Cluba, was used for the manufacture of alcohol. Some ad-

vance has been made in the use of molasses as a ratw material for yeast,

bagasse for cellulose and refined sugar for plastics. There are many

possibilities but the processes inavolved are not at present normally per-

formed in the cane producing countries.

It can be safely concluded that no prolonged shortage of sugar

need be expected. Increased production through a larger area and increas-

ed yields are a distinct possibility and are much more likely to occur for

cane sugar thaan for beet sugar. A reduction in the prewar area for beet

is also unlikely on general farming considerations.

(2) Consumpticn

The development of consumption depends on two factors, firstly,

an increase in populations and, secondly, an increased rate per capita.

Among countries already -oossessing a high rate of consumption

increases are relatively difficult. The rate of population increase is

- 15_

slower and advances in the rate of consumption become less pronounced as

saturation is approached. The saturation point varies considerably be-

tween countries as dietetic habits differ and alternative foods are scar-

cer or more plen'tiful. The best prospects for increased consumption in

these countries lie in rising income levels of the lowrer income groups.

Variations in farm cash income also have a pronounced effect. The United

States is a recent example of increased consumption due to these factors.

Countries witil low and medium rates of corsumption are predomin-

antly agricultural and farm cash income influences the rate of consumption

materially. Population increases are more pronounced and movements towards

urbanization and industrialization all tend to increase total consumption.

In many of these countries higha taxation, owing to their precarious finamn-

cial positionis, has a marked retarding in,fluence.

It can be concluded that ccnsumption will continue its upward

trend, after postwar recovery has taken place. When countries, which have

reduced consumption during the war, return to their prewar levels world

consumption will be around 10 nercent above the prewar level, owing main,

ly to increases in Western HXemisphere consumption. This position may 'be

reached before 1950, if e:;change difficulties do not prove too restrictive.

Since potential and probable increases in production are considerable, even

if limited to recovery in war affected areas, there is a distinct danger of

a return to the surplus position of the thirties. This position is the

more likely and will be agera'rated by the fact that reductions in cane cul-

tivation are slowed by cultivational factors.

(5) .rices

Assuming that production and consurm-tion of sugar progress along

the lines indicated world prices may be epected to resume their downward

trend in the near future. It must be remembered that these prices will not

apply to suDnlies within preference systems, particularly the 'United States

- 16 -

insulated by its quota system. The main hopes for stable or rising prices

lie in trimming production for the free market to the dem-ands of that mar-

ket, lowering of ta=ation and limiting the influence of preference systems.

In view of production, fiscal and exchange factors, such hones would not

appear to be well founded although the first and tlae last would be possible

under a revival of the International Sugar Agreement of 1937 at its expiry

on 31 August l948-

WORLD PPODUCT IxT O F SUGAR(thousand metri.c tons)

Average Average Average1909-1O/ 1924-25/ 1929-.30/ Season(m) Season(m)19T1h3 /14 1928-29 1933¢-34 1936/37 1946/47

Cuba 2100 4840 3010 3080(j) 5850Hawaii, Puerto Rico anid

Philippines(a) 1210(b) 2020 2850 2820 1960United States 890 1090 1440 1660 1840

Total 4200 7950 7300 7560 9650

Mauritius 220 230 250 320 2g90British East Africa - 10 _ 20 70British West Indies(c) 250(d) 360 470 710 640Fiji 80 90 110 140 120United ICingdom - 140 370 580 630Australia 200 490 590 800 540Canada 10 40 50 70 100Unior of South Africa 80 220 340 440 440

Total 840 1580 2180 3080 2830

Japan 60(h) 100(h) 110(h) 160 10Formosa 170 550 830 1080 50Japanese Mandated Territory- 10 40 60 90Manchukuo - 30

Total 230 560 980 1310 180

France 770 730 950 860 760French Colonies(e) 160 120 140 200(j) 150

Total 930 850 1090 1060 910

Portuguese Colonies(f) 20 80(i) 90 150 130

TOT.AL: All PreferenceAreas- 6220 11020 11640 13160 13700

(13520) (k)Yetherlands Indies 1350 2470 21 ', 1480 20Peru 180 340 430 420 400Dominican Republic lOO(g) 340 390(j) 450(j) 470Germany 1870 1670 1670 1740 990Czechoslovakia _1260 780 680 590Hungary 450 190 160 140 70USSSR 1430 810 1230 2140 2000Poland 690 590 570 440 4303Tetherlands 220 290 250 240 240Belgium 260 300 240 240 230All Others 4760 5930 7130 8050 5550

~~ . ^ '. _ . . I I I ( 5730) (l1)WOID TOTALS 17530 25210 25680 29180 24690

(See following page for footnotes)

Footnotes

(a) IAcludes Hawaii, Puerto Rico and Philippines.(b) Philippine figure for 1913/14 only.(c) Includ.es British West India Islands and British Guiana.(d) British Guiana figure for 1911/12 to 1913/140 Figures based

on exports for Barbados and Antiqua in British West In'-diesgroup<

(e) Includes Martinique, Guadaloupe and MTadagascar and. Reunion.(f) Includes Angola and Mozsmbioue.(g) Average 1910/11 to 1913/14.(h) Includes raw and refined. sugar and molasses.(i) Average oL four years for 'tiozambJique.(j) Unofficial data,(k) Xxcluding Japane.se Thmpire.(1) Including Japanese Empire.(m) Sepotember - August.

Source: Statistical Yearbook, International Institute of Ag,.riculture.

WORLI TRAM IN SUGAR

Grou= I - Preference Systems(tho.isand metric tons)

Average Average Average Season(k)1909/13 1924128 1929/33 1937 1946147

United States:Exports & Re-exports(a) 2932 6306 5692 $272 6387Imports(b) 2808 5089 4698 4575 4638

Net Exports 124 1217 994 697 17493ritish:Exports & Re-exports(c) 526 844 1294 2037 1212Imports(d) 2113 2340 2496 2717 2229

Net Imports 1587 1496 1202 680 1017Japanese:

Tilxports & Re-exports(e) 171 680 972 1147Imports(f) 318 890 958 1302 46

Net Imports 147 210 (-14) 155 46French:Exports & Re-exports(g) 299 316 395 396 22Imports (h) 231 517 543 520 304

Net Imports (-68) 201 148 124 79Portuguese:Ex ports & Reexports(i) 28 66 92 100 87Imports(J) 36 76 67 69 64

Net E-srports (7,8) (.0) 25 31 23

(a) USA, Cuba, Hawaii, Puerto Rico, Virgin Islands and Philippines.(b) USA, Alaska and Puerto Rico.(c) United Kingdom, Australia, Union of South Africa, Mauritius,

Fiji and. West Indies,(d) United Xingdom and Canada.(e) Japanr, Formosa and. Korea.(f) Japan, Korea andY Manchukuo.(g) France, Martinique, Guacdeloupe and Reuziion.(h) France, Algeria, Tunisia, Indochina and Iiest Africao(i) Mozambique and Angola,(J) Portug-al.(k) September - August.

Source: .11tatistical Yearbook, International Institute of Ag-riculture.Statistical 13ulletins of the International Sugar Cooucil.

WORILD TRADE I>; SUGAR

GroM_11X Fr-ee M;arket(thousand metric tons)

Average Average Average Season(d)1 .213 _1924/28 2233 1937 1946/47

E orts and Re-exports:Preference Systems(NTet):United States 124 1217 994 697 1749Portuguese (a) (a) 25 31 23Jaoav;nese (a) (a) 14 (a) (a)French 68 (a) (a) (a) (a)

Netherlands East Indies 1310 2050 1786 1138 -San Doimingo 90 298 345 430 474Peru 133 281 345 312 250Czechioslovakia 514(b) 741 422 259 194USSR 266 73 133 134 _Belgium 140 147 90 78 1Netherlands 132 290 65 70 16P olaind 219 267 52 89Hungary 256 77 64 24Other 1009 553 445 345 148

Ijnpqrts:Preference Systeins(Net):

3r i-Uh 1587 1496 1202 680 1017Japanese 147 210 (b) 155 46French (b) 201 148 124 79Portuguese 8 10 (b) (b) (b)

French IMorocco 43 96 148 179 84Netherlands 75 300 144 158 61China 301 681 616 157 48Switzerland 107 130 156 145 167British Malaya 80 109 104 139 80Belgium 7 67 78 133 30Chile 7? 109 116 126 150Norway 47 72 78 91 88Iran 112 70 60 90 86Finland 45 74 83 87 37New Zealand 57 72 78 87 96Ceylon 20 49 66 77 95Greece 10 57 62 75 63Uruguay 25 40 45 51 50Siam 31 43 45 36 10Egypt 39 61 47 33 13India 629 746 647 17Other 470 969 784 545 647

Free Market Totals:Exports and Re-exoorts 409Z 5949 4995 3570 2944_Imports 391 5662 4707 3185 2546

(a) Net Imports (c) Net Exports.(b) Austria. (d) September - August.

Source: Statistical Yearbook, International Institute of Agri-culture.Statistical Bulletins of the International Sugar Council.

SUGAR PRODUCTION, TRAn AŽTD COITSUMPTIONT, PREWAR(a)(thousand metric tons - raw value)

_ot,e: The following groupings illustrate broadly the extensions ofold tariff preference systems on the basis of current exchangeand trade relationships.

Product- Net Im- Net Ex- Consunp-ion(d) ports ports, tion(d)

United States, Cuba and Terri-tories(b) 7501 801 6554

British Commonwealth and Em-pire(c) 4086 1231 5229

Dutch Empire 1560 1022 551French Empire 1251 367 1539Belgian Fzipire 249 15 265Portuguese Empire 114 33 78

SuN.total I 14761 161l4 1856 14216Other Europe: Other CBEC 2503 586 3075

(Vher 4391 466 3769Other America 2869 581 2198Other Asia and A*frica 1955 543 2531

Sub-total II 11718 1122 1047 11573

TOTAL 26479 2743 2903 25789

(a) European Countries, average 1934/38; all others, average1935139.

(b) Includes Philippines.(e) Includes Pai:istan and Burma.(d) Excludes gur in India.

Source: U.S. Department o£ Agriculture, OWAR.

SIJGAR PRODUCTION, TRA X AND COINSUMPTION, 1946147(thousand metric tons - raw value)

Ncte: The follow^zing grou-jpings illustrate broadly the extensions ofold tariff preference systems on the basis of current exchangeand trade relationships.

ProLduct- Net Irm Net Ex.._ Consion((d) ports -ioorts tion(d)

United States, Cuba and Terri-tories(b) 9644 1484 6910

:British Comnonwealth anrd Em-pire( c) 4043 1401 5228

Dutch Empire 262 45 649French E mDire 952 190 1054Belgian Empire 249 24 239Portuguese Empire 126 23 94

Sub-total I 15276 1660 1507 14174Other Z-urope: Other CE$C 1376 433 1759

Other 3888 174 3762Other America 3670 505 3088Other Asia and Africa 483 346 832

Sub-total II 9417 .7792 679 9441

TOTSA 24693 2439 2186 23615(a)

(a) Excludes 1,0789000 tons increase in stocks.(b) Includes Philippines.(C) Inc1udes Pakistan and Burma.(d) Ezrcludes gur in India.

Source: Statistical B3ulletin of the International Sugar Council.

ESTIMAT"D SUGAR C017TSUMPTICŽ1(Kilograms per head. - refined valuae)

Se.:ason(a) Season(a) Season(a)1-93/31 1935/3 1946/47

Denmark 47,6 52.0 43.9United. Kingdocm 46", 2 50.8 37.1

Australia 46.7 46,3 51.8Sweden 38,3 45,,4 38.1USA 46.3 44.5 43,8(o)Canada 43 ~,4 41,8 33.1NTew Zealand NTot av ail1abl1e I o t a,,vailable 39.8B-ire 35.8 36,0 28.8Switzerland 41.9 33.6 29.3

Norway 2-9.6 2%.7 2558Argentina 29.2 29.1 33,2Belgium 24,~7 27.7 29,3Finland 22,8 27,,6 9.5Netherlands 29i..9 26.9 24,0Clhile 23.8 2r5,8 26.5Austrila Z7.6 24.5 6.3Czechoslovakia 25.0 24.3 Not availableGermany 24.2 23.3 8.7(b)France 25.3 23.3 17.4

Brazil 22.5 18.2 28.8Mexico 12.6 15. 1 21,2USSR 10.6 12.6 NoTt availableTH-xngary 12,6 11,3 6,5Spain 12,4 11.3 7,3Poland. 11.4 10.7 11.5Japan 9.1(d) 10. ,4(d) 0.1Greece 10.5 10.4 8.0

India 7.7 8.7 8.0Portuagal 8.6 7.6 9.7Italy 8.3 7.3 5.4Yvgos1awia 6.7 5.0 3q.0Rumania 4,7 5,.0 2.2Turkey 4,1 4.3 4.5Bulgaria 5.2 3.7 4.9China 2.0 1.9 0,9

,(a) September August.(b) U-S/UK Zone only,(c) Calendar year 1947.(d) Includes Pormosa and 'Zorea.

Source: F.O. Lichat, World Sugar Statistics, 1937.FAO f'or 1946/47.

RAW STJGAR PRICES

(cents per pound)

Official C & F C & F Spread betweenYear CuLban Pro- New Tork London N,Y. and London

medio(l) (N.Y. C & F Pricesbasis)

1926 222 259 Z6pz 31927 264 296 291 A 51928 2i8 245 249 41929 172 2C0 191 'A 91930 123 148 136 A 121931 11l 134 125 7L 91932 71 93 87 L 61933 97 L23 97 'A 261934 119 148 104 ,L 441935 158 233 100 $ 1331936 173 271 100 7L 1711937 176 255 127 'A 1281938 14,5 204 114 g 9o1939 151 187 146 4A 411940 136 189 133 $ 561941 169 248 185 'A 631942 253 2991943 244 2991944 247 2991945 294 3421946 355 4611947 Not yet avail- 547

aVI e

(1) Official Havana price representing the average net returnfor Sugar sold in United States, other foreign and localmarkets, The prices are given as published in Cuba interms of Cuban currency and. weight, the Cuban pound be-ing approximately 1 percent heavier than the pound avoir_.dupois. The Cuban pesc usually has been practically ona par basis with and equivalent to the V.S. dollar.

Source: U.S. Tariff Commxi5sion,

ESTIMATED WORLD PRODUCTION OF CANE AND BEET SUGARRAW VALUE

(IN MILLIONS OF TONS- 2000 LBS.)40 .40

YEARLY

35 3 5

30 /30

25 25

20 x , / ~~~~~~~~~~~~~CANE SUGAR fs w

1 5 1 -,_ 15

BEET SUGAR

I10 A s S/;I ../

5 ~~~~~~~~~~~~~~~~~~~~~~~5

0 I I I I I I I I I I I I I I I I I I I I 01900 1910 1920 1930 1940 1948

SEASON BEGINNING

SOURCE: 1900-1919 F.O. Licht,World Sugar Statistics 1937 1920 and thereofter U. S. Deportment of Agriculture I.B.R.D.- Research Dept.

WORLD TRADE IN SUGAREXPORTS AND RE-EXPORTS

14 (IN MILLIONS OF METRIC TONS) 14

12 12TOTAL

10 ____ 10

8 8

6 6

4

0 0AVERAGE AVERAGE AVERAGE YEAR SEPT.- AUG.1909-13 1924 - 28 1929 - 33 1937 1946-47

SOURCE: International Institute of Agriculture and International Sugar Council l.B.R.D.-Research Dept.

RAW SUGAR PRICES(CENTS PER POUND)

120 120

100 0oo

80 80

60 60

40 L F t ANEW ~~~~~~~~YORK 40 4

20 20t < LONDON'OFFIC~IAL CUBAN *__ -- ;

PROMEDIO* IN* kj

0 I I I 0

1900 1910 1920 1930 1940 1948

' Official Havanna price representing the average net return for sugar sold in United Stotes,other foreign ,and local morkets.

SOURCE: U.S. Tariff Commission I.B.R.D.-Research Dept.