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DJ World Sugar Industry Faces Major Challenges: Conference

DURBAN (Dow Jones)--Despite a welcome rise in prices, fears of increasing world sugar stocks, growing competition from artificial sweeteners and the continuation of politically-motivated trade agreements are serious concerns for sugar producers. 

The world's largest growers are relieved that sugar prices have recovered but delegates at the seventh World Sugar Farmers' Conference in Durban, South Africa, identified a range of challenges the industry will have to address. 

Drought in Brazil, the world's largest producer, is a major reason for the recovery in world prices to above 10 cents a pound from last year's all-timer low of less than four cents a pound, but many see this as temporary. 

Tony Hannah, chief economist of the International Sugar Organization, said prices will probably retreat to between eight and nine cents a pound. 

Peter Baron, chief executive of the International Sugar Organization, warned the 150-strong gathering that globalization and privatization threaten to alter irrevocably the make-up of the global sugar industry. 

His remarks were extended by Gerard Doornbos, president of the International Federation of Agricultural Producers who urged sugar beet and cane farmers to become more unified and efficient or continue to be victims of vicious price cycles. 

Brazilian delegates encouraged producers to focus on producing alternative energy sources. Currently, 55% of Brazil's cane production is going towards producing the fuel additive ethanol, and is now a priority. Brazil wants to see ethanol, used to reduce exhaust emissions, become a more important globally traded commodity. 

Other sugar producing countries must diversify into making alternative fuel and energy sources that are renewable and environmentally friendly, said Luis Carvalho, the head of a UNICA, a major Brazilian agricultural body. 

"Otherwise they will constantly remain hostage to our ability to produce sugar cheaply and in vast quantities," he said. 

While its sugar cane production is expected to slump to 255 million tons in 1999-2000, from 305 million tons in 1998-1999, it could easily bounce back in 2000-2001. 

E.U. delegates also joined the call for a sharp increase in ethanol production to satisfy ever-tightening emission controls. 

Australia is pushing, via its leadership of the Global Alliance for Sugar Reform and Liberalization, for a better deal for producers that do not qualify for preferential price treatment by the European Union and the U.S. 

The country has threatened to quit the World Association of Beet and Cane Growers. 

A U.S. delegate warned of worsening relations between Mexico and the U.S. over Mexico's insistence that it be allowed to export its entire sugar surplus to its northern neighbor. 

Mauritius emphasized the need for remote island nations to be granted special status where substitute industries for sugar cannot be established, while Swaziland insisted that sugar is a political commodity.