Report No. EC-176a This report may not be published nor may it be quoted as representing the view of the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION MEDIUM-TERM TRENDS IN THE INTERNATIONAL SUGAR MARKET August 1970 Economics Department FILE COPY Prepared by: Gertrud Lovasy PRE FACE In this report prospective trends in consumption, production and trade of sugar in major importing (mainly developed) and exporting (mainly developing) countries have been analyzed. Taking into account the complex institutional framework dividing the market into a number of separate trading areas, an attempt has been made to forecast medium term growth and structural changes on the international sugar market. The study is part of the continuing research program of the Trade Policies and Export Projections Division, Economics Department. It has been prepared by Miss Gertrud Lovasy, Consultant to the Depart- ment, who wishes to thank Mr. A. J. iacone, Division Chief, for very valuable comments and suggestions. Mrs. Helen Bothwell has assisted in the preparation of statistical material. Andrew M. Kamarck Director Econonics Department TABLE OF CONTEITS Page No. SUMMARY I. INTRODUCTION 1 A. Basic Assumptions 1 B. The Method Applied 3 II. PROJECTION,S 4 A. Net Importing (Excluding Centrally Planned) Countries 4 Developed Countries 4 Developing Countries 7 "Most likely" developments compared to past growth 7 Import demand by market sectors 10 Demand for inventory adjustment 12 B. Centrally Planned Net Importers - Supplies Available from Cuba 12 C. Net Exporting Countries 16 Consumption estimates 16 Demand for exports and production required by 1975 16 Prospects for major exporters 21 III. PROSPECTIVE DEVELCPMENTS ON THE WORLD MARKET 31 International trade 31 Prices 36 ANIEXES Summary of Main Arrangements Regulating Trade on the International Sugar Market Statistical Appendix SUMMARY 1. The purpose of this paper is to provide a tentative estimate of prospective, medium-term developments on the international sugar market - growth of consumption and production, globally and in major exporting and importing areas; volume and structure of international trade and probable price developments. The estimates apply to the mid- seventies; although for the sake of brevity reference is made to the year 1975, it should be understood that the projections indicate trend values around that time but not actual values in that particular year, which may be affected by various unpredictable short-run factors. 2. Forecasts have been based on the assumption, spelled out in some detail below, that the existing institutional framework controlling trade and, indirectly, prodhction will be maintained in its broad lines. It therefore is expected that output will be adjusted to consumption requirements and that production and consumption will be in reasonable balance. Using 1966-68 average data as a base, the projections indicate that aggregate world consumption up to the mid-seventies will rise at an annual average rate of slightly more than 3 percent. The advance will be much more pronounced in developing areas, where a relatively low per caput consumption provides much scope for further expansion; moreover, population growth is faster than in other areas. World production will increase by some 2.8 percent and the apparent surplus of recent years will disappear. Production growth will also be heavily concentrated in developing areas, including Cuba; the growth rate of some 4 percent will be more than twice as high as in other parts of the world. The trend toward greater self-sufficiency, particularly in developing importing countries, will continue; moreover, most of the additional output in net exporting countries will be used for domestic consumption. Hence, as in the past, world trade will grow more slowly than either consumption or output. The complex structure of trade which developed after the cessation of U.S. imports from Cuba will persist: Cuba will continue to export large quantities to the centrally planned.countries and part of these shipments will be re-exported to the free market. Cuban exports to centrally planned countries as well as to the free market will gain, both in absolute and relative terms. Those of developed countries will decline. Imports by the U.S. and the U.K. at special prices will grow, more slowly than those to the free market and the rise in exports by developing countries (other than Cuba) will be heavily concentrated on the latter. Prices on the free market, which were extremely low in 1966-68 but have improved since, should gain further, provided that the International Sugar Agreement keeps exportable supplies in balance with import demand. I. INTRODUCTIO11 A. Basic Assumptions 1. The projections for the mid-seventies have been based on the assumption that the institutional framework controlling sugar trade and dividing the market into several sectors would be maintained in its broad lines. The U.S. Sugar Act, regulating domestic production as well as imports, would be renewed without changing its essential features. Current regulations, under which additional mainland consumption is met by domestic output and imports in the ratio of 65:35, would be maintained. However, in view of the large and rising shortfalls of Puerto Rican sup- plies, the present provisions, under which shortfalls are re-allocated exclusively to foreign suppliers, are expected to be modified when the Act comes up for renewal in 1971.1/ 2. The privileges granted under the Commonwealth Agreement, pro- viding for U.K. imports from Commonwealth sources of certain quantities at agreed prices, would be maintained, even if the U.K. were to join the Common Market. Bilateral agreements between Cuba and centrally planned countries, notably commitments by the USSR to purchase agreed quantities at special prices, would be extended. The present International Agree- ment (in force since January 1969) which aims at stabilizing prices on the residual free market through export controls, would be renewed and would retain the provisions which limit re-exports to the free market by centrally planned countries importing sugar from Cuba. Under such con- ditions the sharp price fluctuations experienced during the sixties would not recur; free market prices would generally be maintained within the range aimed at under the Agreement (3.25 to 5.25 U.S. cents per pound). 2/ It furthermore has been assumed that the sugar policy within the Common Market, which could lead to a considerable increase of exportable supplies, will be modified and, whether or not the group accedes to the International Agreement, net exports to the free market would not (or not appreciably) exceed the quota reserved for the group. 3. These assumptions narrow down the scope of the exercise; yet they do not appear unrealistic for the medium term. The U.S. Sugar Act, which comes up for renewal in 1971, dates back to 1934; since then it has been periodically extended and, in spite of repeated revis- ions and amendments, has preserved its essential features. There are no indications that - apart from modifying the rules on shortfall allocation - any changes of substance will be made ih 1971. However, 1/ Domestic mill capacity on the mainland is presently not fully utilized and there have already been repeated requests by domestic producers to change the provisions of shortfall allocation in their favor. 2/ For a summary of the main arrangements regulating international trade in sugar see Annex I. - 2 - a major shift in the pattern of U.S. imports could be caused if diploma- tic relations with Cuba were resumed: in that case the quota reserved for Cuba,2/ temporarily assigned to other foreign suppliers, would be restored to that country. Such a development cannot be precluded in a more distant future, but the chance that it will occur within the period under consideration appears remote. 4. The Commonwealth Agreement, first concluded in 1951, has been extended with some changes almost automatically every year. Presently the duration is indefinite. In the event that the U.K. should join the Common Market current commitments would not continue beyond the end of 1974. However, the U.K. has repeatedly indicated its intention to main- tain the privileges granted to Commonwealth sources of supply, although they would have to be extended in a different form.,Z/ 5. The bilateral agreement between Cuba and the USSR, providing for sugar trade up to 5 million tons, will expire at the end of 1970. Cuba has regularly exported to the USSR, although the volume has been well below 5 million tons. Current conditions - a relatively short crop in the USSR and prospects for ample supplies in Cuba - suggest that shipments in 1970 will increase. Moreover, the USSR seems to be eager to expand future imports of Cuban sugar. There can be little doubt that the agreement will be extended, though volume and price might be changed. 6. The International Sugar Agreement, originally concluded in 1953 and renewed in 1958, was suspended in 1961, as Cuba's claim for a greatly increased quota could not be accommodated. Repeated negotiations finally led to the conclusion of the present Agreement, which came into force in January 1969. The much more stable mar ket conditions during the lifetime of the earlier Agreement, the protracted period of extremely depressed prices in the late sixties and their recovery after the new Agreement started operations will in all probability strengthen the desire for continued market control beyond the expiration date (December 1973) of the Agreement. 7. Modification of the current sugar policy within the Common Market is expected mainly because of the heavy financial burden arising from export subsidies, in addition to those on domestic consumption, which are strongly resisted by some members. Attempts to modify current prices and quotas have already been made, but so far no agreement has been reached. There can be no doubt, however, that efforts to lighten the financial burden will be resumed. 1/ I.e., 50 percent of the market not assigned to domestic producers and the Philippines (see Annex I, page 1). 2/ See Annex I, page 4. - 3 - B. The Method Applied 8. Forecasts of consumption in both net importing and exporting countries have been based on projections of population growth and on estimated developments of per caput consumption, taking account of their current level in individual countries, of growth trends in the sixtieS, of special circumstances (such as the recent ban on cyclamates) and, in some cases, of countries' own projections. Except for centrally planned importing countries, one single figure rather than a range has been es- tablished. This implies that no allowance has been made for the possible effect of changes in the rate of income growth or of prices paid by con- sumers. However, in the medium term no such changes are likely. More- over, in most developed and in those developing countries where consump- tion is high, the income elasticity of demand is negligible. Finally, in contrast to the sharp fluctuations in world market quotations, retail prices in most countries have been kept fairly stable. They frequently reflect high domestic production costs and sometimes are inflated by high revenue taxes. Although tax reductions might well stimulate consumption, the chances of such reductions seem remote. 9. Estimates of production in net importing countries (in the form of ranges) have been based, where possible, on countries' plans with res- pect to their sugar industries, on IBRD Economic Reports and their find- ings, on information with respect to resources available and capacity of raising yields, and on past performances. Prospective import demand was derived as the balance between estimated consumption and production. 10. A different approach was followed with respect to production in net exporting countries. Since it has been assumed that international market control, in the form of restricting exports to anticipated import demand, would continue, it is to be expected that exporting countries will plan future production accordingly, aiming at levels sufficient to cover (but not exceed) domestic requirements plus their respective shares on export markets. Barring serious misjudgment of domestic and export demand, this would restore and maintain overall market balance. A similar procedure has been applied here in estimating production - global and for individual exporting countries. Aggregate production has been derived as the sum of their domestic requirements plus export demand (equal to estimated total import demand as forecast above). A tentative allocation by areas and countries was then based on their prospective shares under . special marketing arrangements and free market quotas under the Inter- national Sugar Agreement. 11. The particular position of Cuba in relation to importing centrally planned countries calls for still another approach in estimating their production. Although Cuba is a member of the International Agree- ment with a limited share on the free market, exports to centrally planned countries are not subject to restrictions. Commitments under the Inter- national Agreement only limit the quantities which may be re-exported to the free market, but not those retained by centrally planned importers. Production of Cuba will be determined by the country's own target and its ability to meet it; the forecast for Cuban production has therefore been stated in the form of a range. It has been assumed that any foreseeable surplus beyond domestic consumption and export rights on the free market would be absorbed by the USSR and other centrally planned importing coun- tries, and that their consumption and/or production would be adjusted accordingly. II. PROJECTIONS A. Net Importing (Excluding Centrally Planned) Countries Developed Countries 12. Net imports as well as consumption of sugar are heavily concen- trated in this group of countries. Four of them - the United States, the United Kingdom, Japan and Canada - account for some 60 percent of total net sugar imports and for about the same proportion in importing countries' total consumption.i/ 13. In the United States, where consumption in recent years has been close to 10 million metric tons, a moderate further increase of about 1 million tons is expected (Annex Table M-1). This figure is based on an estimated rise of current mainland per caput consumption of 49 kilograms to 50 kilograms by 1975 reflecting, in part, substitution for cyclamates, the use of which has been prohibited (except for dietary purposes). Some gain should also arise through the somewhat larger proportion of young persons in the U.S. population projected for 1975. However, the principal factor in the anticipated rise in total consumption is growth in popula- tion. The shares of mainland consumption to be met by domestic (including offshore) production and by imports are determined by the U.S. Sugar Act; under current provisions (in force until the end of 1971) any increase in consumption is allocated in the proportion of 65:35 between these two sources of supply.Y/ Import allocations in recent years have greatly ex- ceeded basic quotas; these additional allocations resulted from persistent and rising shortfalls in Puerto Rican supplies which were distributed to foreign countries, mainly in the Western Hemisphere. It cannot be expected, however, that these windfall gains will be maintained at the high level of recent years. A rehabilitation program designed by the Puerto Rican authorities is aimed at a reversal of the downward trend in production; 1/ The shares of these countries' net imports in 1966-68 were as follows: U.S. 30 percent; U.K. 14 percent; Japan 12 percent; Canada 6 percent. 2/ For details see Annex I. - 5 - although prospects are not very favorablei/ some increase in production and available supplies from the island could be achieved. Moreover, as mentioned above, it is almost certain that the current procedure of allo- cating total shortfalls to foreign countries will be changed. 14. The projections of U.S. imports in 1975 have been based on the current provisions of the Sugar Act, taking account of this change. It has been assumed that in the future shortfalls will be allocated between domestic and foreign so ces in the same proportion as increases in con- sumption, i.e., 65:35.27 The computations made on that basis arrive at total imports of 4,80 to 4,630 thousand metric tons./ These figures include, in addition to quota imports at preferential prices, an estimate of 150 thousand tons of "non-quota" imports for feed, production of alcohol and use in sugar-containing products for export, regularly admitted at prevailing world prices. Since imports in the late sixties were infla- ted for the reasons stated above, their rate of increase in the future, even if the higher figure were reached, would be considerably slower than the anticipated rise in consumption; the annual average growth rate in imports would be 1.2 percent as against 1.9 percent in consumption. 15. In the United Kingdom per caput consumption, after a temporary decline in the early sixties, has remained close to 52 kilograms in recent years and no change has been assumed in the future. Except for minor year to year fluctuations, production, which covers about one-third of domestic demand, has also been fairly stable. Population growth should raise consumption from about 2.9 million tons in recent years to over 3 million tons in the mid-seventies, of which some 2 million tons would be met by imports. 16. Per caput consumption in Canada has varied between 46 and 5O kilograms per year, with no perceptible trend. The 1975 forecast has been based on 50 kilograms, the same as for the United States. Produc- tion is expected to remain small, well over 80 percent of demand being covered by imports. On that basis net imports by 1975 should reach about 1 million tons, compared to 0.B5 million in recent years. 17. Japan is the only one of the four countries (and, indeed, one of the few developed importers) where there is considerable scope for a further rise in per caput consumption. The 1975 estimate assumes continued 1/ Increasing emphasis has been placed on industrialization and on tourism; labor has been and is expected to remain in short supply, partly because of alternative opportunities and also on account of emigration to the mainland; production costs have been steeply rising. 2/ This is obviously an arbitrary assumption but the exact nature of the expected re-allocation cannot, of course, be predicted. 1/ The range reflects different assumptions with respect to the magnitude of Puerto Rican shortfalls. -6- growth at loughly the same rate as in the sixties. In view of the an- ticipated vubstitution of sugar for the recently banned cyclamates, which were widely used in Japan, this assumption appears not unrealistic. Per caput consumption by 1975 would reach 32 kilograms, but even at that level it would still remain below consumption in other developed and in a number of developing countries.1/ The sharp rise in the country's produc- tion througout the mid-sixties has slowed down and, according to a recent statement!, no further expansion of acreage is planned, though some gain in output may be expected from improving yields. The production range projected for 1975 allows for such gain; but higher yield per se could hardly raise production beyond the lower limit and a further rise would in all likelihood necessitate some addition to acreage. Should consumption reach the expected level of 3.4 million tons, import demand could rise by as much as 1 million tons over the 1966-68 level.. 18. The four major importers of sugar will continue to be the principal markets for net imports and little change in their combined share in total net imports is expected. However, Japan will replace the United Kingdom as the second largest net importer,'/ 19. In most other net importing developed countries per caput coh- sumption is high and total consumption will expand only slightly. Greece, Spain and Yugoslavia are the main exceptions. Should their plans for a substantial expansion of output materialize, the share of consumption met by domestic output in these three countries would greatly increase and imports may actually decline. Some other countries in the group - notably New Zealand, Norway and Switzerland - cover all or most of their require- ments by imports and any increase in their consumption would add to import demand. 1/ The estimate does assume further increase in per caput income, but makes no allowance for the possible effect of a reduction in the very high domestic retail price if such a reduction were to occur. 2/ Statement by the Japanese Delegation at the International Sugar Con- ference in October 1968. There is no guarantee, however, that plans might not be changed. 3/ It should be noted that such increase would considerably exceed the rise to which Japan would be committed under the obligation assumed under Article 51 of the International Agreement. Japan has undertaken to import not less than 35 percent of any rise in consumption beyond 2.1 million tons; thus, if consumption should reach the anticipated level of 3.4 million tons, Japan's commitment would call for additional imports of some 450,000 tons - far less than the actual rise expected. h This remark applies to volume only; since the greater part of U.K. imports are at special prices considerably higher than the "world" price paid by Japan, the value of U.K. net sugar imports will continue to exceed that of Japan. -7- Developing Countries 20. These countries are continuing their efforts toward achieving greater self-sufficiency, though perhaps not so rapidly as in the sixties. In the Western Hemisphere only a few countries, notably Chile and Uruguay, remain net importers. They have been steadily expanding production and additional import demand will be moderate. 21. In Africa the number of countries developing their own sugar industry keeps rising; others, including Morocco (until recently the largest importer among the developing countries) are expanding existing capacity. Some of the net importing countries, e.g., Zambia and Senegal, are aiming at turning into net exporters. Should their plans materialize, African import demand might decline to less than its current level. 22. Developments among Asian importing countries show a similar trend: except for some of the Middle Eastern oil countries very few will remain entirely dependent on imports of their sugar requirements. Iran, however, is in the process of raising beet acreage and adding processing equipment, attempting to become self-sufficient in the early seventies. Malaysia plans to develop production and reduce dependence on imports. In Pakistan per caput consumption, sustained by a substantial increase in domestic output, has been rapidly rising through the sixties replacing, in part, consumption of "Gur" (non-centrifugal sugar). Further development in that direction is planned, but probably will proceed at a much more moderate rate. For some of the major importers of Asia, including Ceylon, Iraq, South Korea and South Vietnam, domestic production, if any, is ex- pected to remain small in relation to requirements and imports should continue to rise. Production in Indonesia, a net exporter through the fifties and part of the sixties, has been stagnant for some time and, in recent years, the country had to supplement output by imports. The Govern- ment is planning to revive production, but current conditions suggest that this will be a slow process. Although only a minor increase in per caput consumption is anticipated, rapid population growth will raise domestic requirements and it appears likely that the country will remain a net importer for some years to come.2/ Even though output in a number of Asian importing countries is growing, it is expected that import demand for the group as a whole will show at least some increase. "Most likely" developments compared to past growth 23. It cannot be expected that production and import demand of all or even a large majority of countries will necessarily be clustered around either the lower or the upper limit of the ranges shown in Annex Table M-l; / It should be noted that Indonesia has joined the International Sugar Agreement as an exporter, with a net export entitlement (not a basic quota) of 81,000 tons per year. In view of its position in recent years and of expected developments, however, the country has in this paper been included among net importers. -8- the addition of all the "low" and all the "high" figures is bound to give unrealistic results. The odds are that for the aggregate of all importing countries the midpoint of the ranges shown in Annex Table M-1, i.e., 15.9 million and 15.75 million tons for production and imports, respectively, would give a better approximation. An attempt has been made, however, to go somewhat further and to estimate the "most likely" prospects for major individual importers; for others the midpoints of the ranges have been taken. 24. The results, summarized in Table 1, suggest that for the developed countries the "most likely" aggregate import estimate cames close to the higher figure and, conversely, the corresponding production estimate close to the lower figure of the range indicated in Annex Table M-1. This reflects largely the rather optimistic views with respect to imports by the U.S., the U.K., Japan and Canada.1/ The expectation that U.S. imports will be close to the upper limit of the range is based on the belief that Puerto Rican shortfalls would not decline much below their level of recent years.a/ In the U.K. as well as in Canada produc- tion has not changed much in recent years; it seems probable that both countries will meet all or the better part of the rather modest increase in this consumption through rising imports.2/ AS mentioned earlier, Japan does not, at this stage, intend to expand acreage; the "most likely" estimate of production and imports of that country assumes no change in this policy. Hence production would increase only moderately - through improved yields - and most of the expected large rise in consump- tion would be met by imports. 25. For the developing countries as a group aggregate imports and production would come close to the midpoint of the ranges. Imports into African countries would be fractionally above and those into Asia slight- ly below the respective midpoints. For some of the major importers 1/ Included in "other developed countries". 2/ As pointed out earlier (see footnote 3 on page 5) the range in U.S. imports indicated in Annex Table M-1 reflects different assumptions regarding shortfalls of Puerto Rico. The assumed distribution of shortfalls among domestic and foreign sources of supply (65 to 35 percent) has been the same for the lower and upper limit. 3/ This implies a minor increase in Canada's production, and no change in the U.K.'s, as compared to the late sixties. In the case of the U.K. no account has been taken of the possibility that should the country join the EEC, the higher prices paid to domestic producers after the transition period could stimulate output and reduce import demand. It is not expected, however, that such a development would occur during the period under consideration. - 9 - Table 1: SUGAR: "MOST LIMELY" DEVELOPMENTS IN IMPORTING AREAS, 1975 COMPARED TO 1966-68 AD GROWTH IN EARLIER YEARS Estimates for 1975 1966-68 average Consump- Produc- Import Consump- Produc- Import tion tion Demand tion tion Demand4 -------------- (Million metric tons) ---------------- Develied: U.S. 11.45 6.85 4.60 9.85 5.65 4.20 U.K. 3.0 .95 2.10 2.90 .95 1.95 Japan 3.40 .75 2.65 2.25 .60 1.65 All other 4.85 2.55 2.30 4.10 2.00 2.10 22.75 11.10 11.65 19.10 9.20 9.90 Developing: Western Hemisphere .60 .30 .30 .45 .20 .25 Africa 3.10 1.65 1.45 2.20 .75 1.45 Asia and Oceania 5.25 2.70 2.55 3.80 1.65 2.15 8.95 4.65 4.30 6.45 2.60 3.85 Total 31.65 15.70 15.95 25.55 11.80 13.75 1966-68 to 1975 1958-60 to 1966-68 -------------------(percent)------------------- Annual average growth rate: Developed 2.2 2.4 2.1 2.4 3.6 1.3 Developing 4.1 7.3 1.5 4.3 6.0 3.1 Total 2.7 3.6 1.9 2.8 4.1 1.8 Note: Totals may not add due to rounding. Growth rates computed before rounding. 1/ Consumption minus production, disregarding stock changes. Actual net imports into the areas shown amounted to 14.15 million tons, of which some .4 million tons were apparently added to stocks. Part of the difference may, however, reflect statistical discrepancies. 2/ Including offshore areas. Source: Based on Annex Table 1-1 (minor differences in sae of the data are due to rounding). - 10 - in both continents where production is quite small not much if any change is expected and the ranges shown (see Annex Table N-1) are very narrow; for others, which are planning expansion of output the "most likely" esti- mates have been based on considerations with respect to the probable degree of self-sufficiency attained by the mid-seventies. 26. Annual growth rates, shown in the lower part of Table 1, indi- cate that in developing countries consumption and production will rise much faster and imports much more slowly than in the developed group. Compared to movements in the preceding eight years there will be a minor slowdown in the rate of consumption growth in both groups of countries. In the developing group expansion of output is expected to accelerate, reflecting continued striving toward greater self-sufficiency. The opposite movement is expected in developed countries, since the main reasons for the considerable expansion in the preceding period - uncer- tainty concerning supplies fra Cuba, temporary shortages and high prices,- have subsided. Import demand in this group should grow at a faster rate, largely offsetting the expected slowdown in imports of developing coun- tries. Import demand by market sectors 27. A considerable proportion of net imports - roughly 43 percent in the last few years - have been moving under special arrangements at prices far above the world price level. The greater part of these im- ports is absorbed by the U.S. and most of the rest by the U.K. (see Table 2). For the reason stated above the "most likely" estimate of U.S. quota imports comes close to the upper limit of the computed range. Yet in view of the expected modification in the distribution of shortfalls, the increase campared to imports in the late sixties would be quite moderate: not more than 350,000 tons, or less than 9 percent over a period of eight years. The rise in U.K. imports under the terms of the Common- wealth Agreement's negotiated price quota would be even smaller; it is expected that most of the additional net imports by that country would be met on the free market. No change appears likely in the small volume of trade under special arrangements among African developing countries.i/ Total trade under special arrangements over the period 1966-68 to 1975 would increase by only 400,000 tons, or about 7 percent. 28. A much greater expansion is expected for imports on the free market, largely on account of rising demand by developed importers, not- ably Japan. Although the growth in developing countries would be much more moderate, total free market imports would rise by same 23 percent as compared to 7 percent for those under special arrangements. Hence the proportion of the latter in total imports would decline and a corres- pondingly larger share would move at world prices. / Agreement among former French territories covering 11)4,000 tons and among countries of the East African Community covering 10,000 tons. - 11 - Table 2: SUGAR: ESTIMATED 740ST LIKELY" IMPORT DEMAND UNDER SPECIAL ARRANGEnNTS AND ON THE FREE MARKET 1975,COHPARED TO 1966-68 AVERAGE/ (Million metric tons) Under Special Arrangements Free Market Total 1975 1966-68 1975 1966-68 1975 1966-68 Ddveloped U.S. 4.45 4.1 .15 .10 4.60 4.20 U.K. 1.8 1.75 .30 .20 2.10 1.95 Other - 4.95 3.75 4.95 3.75 Total 6.25 5.85 5.40 4.05 11.65 9.90 Developing .10 .10 4.20 3.75 4.30 3.85 Total all countries 6.35 5.95 9.60 7.80 15.95 13.75 Change from 1966-68 .40 1.8 2.20 Annual average growth rate .9 2.6 1.9 (percent) 1/ Consumption minus production; see Table 1. Source: 1966-68 data: International Sugar Organization Sugar Yearbook 1968 and Statistical Bulletin, various issues. USDA Sugar Reports, various issues. - 12 - Demand for inventory adjustment 29. Since import demand for 1975 has been derived as a balance be- tween anticipated consumption and production, no allowance has been made for additional supplies required to maintain inventories at working levels, i.e., some three months' consumption. As indicated earlier (see Table 1) consumption in importing countries over the years 1966-68 to 1975 is expected to rise by some 6 million tons, or roughly 750,000 tons per year. At that rate of consumption growth an annual increment to in- ventories of roughly 200,000 tons would be required. Such addition would raise global import demand in 1975 to 16.15 million tons.i/ B. Centrally Planned Net Importers - Supplies Available from Cuba 30. The group includes the USSR, the largest single producer and consumer of sugar, with a per caput consumption which in recent years has reached same 40 kilograms; it is met to a considerable extent, but not entirely, from domestic output. The group furthermore includes Mainland China, where domestic production also covers most of the country's consump- tion which, however, on a per caput basis is very low (around 4 kilograms). In addition, East Germany, Bulgaria and some other centrally planned coun- tries of Europe and Asia are net importers of sugar. 31. After the suspension of U.S. imports from Cuba in 1960, large quantities of Cuban sugar were diverted to the USSR and other centrally planned countries. This trade has been conducted under a series of bi- lateral agreements; it has varied from well over 4 million tons in 1961 to 1.7 million tons in 1963, reflecting the sharp fluctuations in Cuban output. Following the severe shortage of Cuban supplies in 1963, produc- tion in the USSR was greatly expanded and in subsequent years increasing quantities have been re-exported to the free market.!/ In the late six- ties re-exports by net importing centrally planned countries reached 1.7 1/ This adjusted figure would have to be compared with actual imports in 1966-68 of 14.15 million tons rather than with the balance between production and consumption of 13.75 million used in Tables 1 and 2. However, the difference of 0.4 million tons does not only represent adjustment of inventories; closer scrutiny of the data suggeststhat part of the difference is accounted for by statistical discrepancies. 2/ The USSR has objected to the term "re-exports", maintaining that the sugar exported was domestically produced while Cuban imports were consumed in the country. However, any export by a net importing country of the commodity concerned is customarily termed as "re-export", irrespective of physical identity. - 13 - million tons, while less than 1.5 million tons were retained by the group.1/ However, under the terms of the International Sugar Agreement, restrictions have been placed on these re-exports.,. 32. In gauging future developments in the sugar economies of net importing centrally planned countries the procedure followed for other importers cannot be applied. Their net imports cannot be derived as the balance between estimated consumption and production. In view of their close trade relations with Cuba, net imports of the group - in particular those of the USSR - would mainly depend on supplies available from Cuba. The consumption estimates for the USSR (and China) in Annex Table M-2 have been given in the form of a range; it is expected that consumption or production developments, particularly in the USSR, will be largely determined by the volume of sugar which Cuba will be able to provide. 33. In recent years production in Cuba has varied from 4.9 to 6.2 million tons; currently supreme efforts are being made to approach the repeatedly announced target of 10 million tons.2/ Although this figure will not be attained, data on output reached so far indicate that total production in the season ending late July 1970 will be in the neighborhood of 8.5 million tons. This does not, however, provide a reliable guide for estimating future performance. Although it is conceivable that pro- duction of that size might be repeated, it cannot be ruled out that relaxation of the present heroic efforts, which could hardly continue without adverse effects on other parts o the economy, would result in a relapse of output to much lower levelsf. It also is possible, but perhaps not very likely, that recognizing the limited scope for expanding exports on favorable terms may induce a lowering of targets for the future. Tak- ing account of these uncertainties, production forecasts for the mid- seventies are given in the form of a wide range - 6.5 to 8.5 million tons. Allowing for domestic consumption of about 700,000 tons some 5.8 to 7.8 million tons would be available for export. Exportable supplies of that magnitude would exceed actual exports in the late sixties by about 1 million to 3.8 million tons (see Table 3). The International Sugar Agree- ment, under the basic export quota, would permit expansion of 1966-68 exports by about 0.6 million tons; re-exports via centrally planned importers of Cuban sugar would remain close to their 1966-68 level. Allow- ing for these direct and indirect export entitlements, amounting in the 1/ In addition, Cuban sugar has also been exported to and re-exported by net exporting countries, including Poland, Czechoslovakia and Hungary. 2/ For details see Annex I, pages 5 and 6. 3/ The highest level reached in the past was 7.2 million tons in 1952 and, more recently, 6.8 million tons in 1961. V/ The Cuban review Bohemia has conceded that other sectors of the economy have suffered from neglect and wastage of manpower (quoted in The Economist, May 30, 1970, page 39). - 14 - aggregate to 3.95 million tons, would leave residual exportable supplies of some 1.85 to 3.85 million tons. It has been assumed that centrally planned countries, chiefly the USSR but also China and others, would pro- vide markets for such supplies. In the early sixties, prior to the decline in Cuban output, net imports of these countries actually reached some 3.3 million tons - not much less than the higher figure of the range mentioned. Subsequently, however, net imports have been much lower (see Table 3). 34. Official USSR data suggest that in recent years domestic produc- tion has covered most of the country's steeply rising consumption. How- ever, largely due to adverse weather conditions accompanied by damage through disease and insects, the current (1969/70) crop has been sharply reduced and will have to be supplemented by large net imports. ecovery of output could be slowed down by further damage to sugar beet... The expansion of Cuban supplies at this time should be of help and its coinci- dence with increased USSR demand for imports should also create a favorable climate for the pending renewal of the agreement between the two coun- tries.2/ 35. Concerning future developments, it has been reported that the USSR would not wish to expand production beyond the level of recent years (prior to the crop damage just mentioned), and would prefer to cover a rising proportion of consumption by imports. Under such circumstances, a substantial part of the expected Cuban supplies, even under the "high" assumption, could be absorbed by the USSR (see Table 3 and Annex Table 1-2). 36. Mainland China, where per caput consumption has remained quite small (some 3-4 kilograms per year), has been a net importer of Cuban sugar in widely varying quantities. In that country the scope for expand- ing per caput and total consumption appears almost unlimited and it is not unreasonable to assume that China might become an expanding market for Cuban sugar.2/ Net imports of other centrally planned countries, which include East Germany, North Korea and North Vietnam, have considerably increased through the sixties; some further modest increases may be anticipated. It should be stressed, however, that the allocation of additional net imports among centrally planned countries and areas shown in Table 3 is quite arbitrary; developments in the countries concerned could lead to a different distribution. 1/ See USDA: Note on "Diseases affecting USSR sugar beets", Foreign Agriculture, May 11, 1970, page 15. 2/ The current agreement will expire at the end of 1970. See Annex I, page 4. 3/ A rough indication of production and consumption developments in the USSR and Mainland China, implied in case of rising imports from Cuba, is given in Annex Table M-2. Available data do not permit similar estimates for other countries of the group. - 15 - Table 3: SUGAR: ESTIMATE OF CUBA'S EXPORTABLE SUPPLY AND OF PROSPECTIVE MARKETS 1975, CO1,PARED TO ACTUAL DATA 1961-68 (Million metric tons) 1975 Estimate Actual Data Low High Midpoint 1966-68 1963-65 1961-62 Exportable supply 5.80 7.80 6.80 4.90 4.35 5.80 Exports to free market2/ 2.15 2.15 2.15 1.55 1.6o 1.55 Exports to centrally planned countries for re-export to free market / 1.80 1.80 1.80 1.90 1.30 .95 Residual supply 1.85 3.85 2.85 Exports for consump- tion in centrally planned countriesi USSR 1.00 2.50 1.75 .75 1.10 2.10 Mainland China .30 .70 .50 .20 .10 1.05 Other .55 .65 .60 .50 .25 .15 1.85 3.85 2.85 1.45 1.45 3.30 / 1975: Basic export tonnages under International Sugar Agreement (as of 1971). 2/ 1975: Export and re-export entitlements of centrally planned importers of Cuban sugar. 3/ 1975: Tentative distribution anong markets. - 16 - C. Net Exporting Countries 37. Forecasts of consumption have been derived on the basis of anti- cipated population growth and estimated per caput consumption - the same method as applied for net importing countries. For the reasons stated earlier, production has been calculated as the sum of damestic requirements plus demand for exports (equal to estimated import demand). The tentative allocation by areas and countries has been based on their shares under special marketing arrangements and on free market quotas under the Inter- national Sugar Agreement. Consumption estimates 38. On the basis of estimates for individual countries, consumption in developing net exporting countries as a group is e ected to rise at an average annual rate of almost 5 percent (see Table 4). / Roughly half of the increase will result from higher per caput consumption, the other half from population growth. This ratio will vary greatly among main areas. In the lestern Hemisphere, where per caput consumption is already high, population growth will be the main factor. In Asia the opposite is true: the very substantial increase in total consumption will largely reflect higher consumption per head. Yet, in spite of the expected rise, per caput consumption in Asia in 1975 would still remain far below the average level in exporting countries of other continents. 39. In developed net exporting countries, which include the EEC group, / per caput consumption is high and the moderate rise expected in total consumption would mainly result from population growth. The same applies to centrally planned net exporters, all of them "developed" coun- tries of Eastern Europe. 40. I Total consumption in all net exporting countries would reach nearly 32 million tons by 1975, implying an annual average rate of growth of 3.6 percent. This compares with a rate of 2.7 percent in net importing (not including the centrally planned) countries. The difference is largely explained by the much greater proportion of developing countries among net exporters, where both population and per caput consumption tend to grow faster than in developed areas. Demand for exports and production required by 1975 41. On the basis of estimated aggregate consumption and of projected demind for imports a rough estimate can be derived of the production volume which will be required in net exporting countries by 1975. For the sake of 1/ For details by individual countries see Annex Table X-1. 2/ The group itself covers, in addition to the Metropolitan areas, the French overseas departments of Guadeloupe, Martinique and Reunion. - 17 - Table 4: SUGAR: SUMMARY OF 1975 CONSUWPTION ESTIMATES IN NET EXPORTING COUNTRIES, PER CAPUT AND TOTAL, COMPARED TO 1966-68 Net exporting Per caput consump- Total consumption Annual average countries tion (kg.) (thousand.tons) growth rate (%) 1975 1966-66 1975 1966-68 Per caput Total Developing: W. Hemisphere 37.5 33.9 11,500 8,20 1.3 4.2 Africa 15.0 12.7 380 265 2.1 4.6 Asia & Oceania 9.0 6.2 6,120 3,690 4.8 6.5 Sub-total 17.2 14.2 18,000 12,205 2.4 4.9 Developed: Australia 58.0 57.0 780 680 1/ 1.7 South Africa 46.0 43.1 1,100 810 0.7 3.9 Western Europe 36.5 34.0 8,820 7,630 0.9 1.8 Sub-total 38.2 35.7 10,700 9,120 0.9 2.0 Centrally planned 38.0 35.3 3,180 2,670 0.9 2.2 Total net exporters 22.6 20.2 31,900 24,000 1.4 3.6 1/ Less than one-half percent. Source: Based on Annex Table X-1. - 18 - simplicity, calculations have been based on the "most likely" demand for imports - 16.15 million tons.!/ Adding an adjustment for loss in transit of 200,000 tons raises the figure to 16.35 million tons.Z/ In deriving required production, allowance has furthermore to be made for the need to raise stocks in exporting countries, in line with increased domestic con- sumption; 200,000 tons have been added for this purpose. 42. Since it has been assumed that increasing production in Cuba would be absorbed by rising net imports in centrally planned countries, net import demand by this group and the corresponding Cuban production have been disregarded in the estimates to be presented. They include, how- ever, free market demand to be met by Cuba - directly or via re-exports by centrally planned countries. 43. The estimate of production required in 1975 indicates that some 48 million tons, as against 39 million tons in 1966-68, would have to be produced to meet domestic consumption and demand for exports in 1975. The main factor calling for an increase of 9 million tons would be expanding domestic consumption; the rise in export demand plays only a minor role (see Table 5).37 44. Since the export -shares of most individual countries are deter- mined by their quotas under special arrangements or, for the free market, under the International Sugar Agreement, a tentative indication of country and area distribution of 1975 exports may be derived on the basis of these 1/ Import demand as shown in Tables 1 and 2 plus 200,000 tons for addition to inventories in importing countries. 2/ This adjustment corresponds to the procedure followed by the Inter- national Sugar Council in estimating import demand. It allows for "non-statistical disappearance" of sugar regularly observed in transit from exporting to importing countries. This adjustment has been con- fined to "free market" transactions only; published data on imports by and exports to the U.S. and the U.K. in recent years did not seem to justify a similar adjustment for trade under special arrangements. 2/ It may be noted that the increase between 1966-68 and 1975, both in absolute and relative terms, would be smaller on the export than on the import side. The annual average growth rate of export demand of 1.1 percent compares with a rate of 1.9 percent if measured against imports over the same period (see Tables 1 and 2). The customary statistical discrepancy between exports and imports was greatly widened in 1968 when exporting countries, anticipating restrictions under the International Sugar Agreement, shipped unusually large quantities in the last months of the year which were not recorded (and may not even have been received) by importing countries before the end of 1968. - 19 - Table 5: SUGAR: ESTIMATE OF PRODUCTIONII IN NET EXPORTING COUNTRIES REQUIRED BY 1975 1966-68 Annual growth 1975 average Change rate, percent (------ Million metric tons -----) Consumption 31.90 24.oo 7.80 3.6 Addition to stocks .20 .20 - Export demand2/ 16.35 14.95 1.ho 1.1 Production required/ 8.h4 39.15 9.20 2.7 / Equal to consumption plus stock increment plus estimated export demand; excluding exports retained by centrally planned importers. 1966-68 average: For comparability with 1975 estimate, adjusted to exclude the amount of Cuban production exported to and retained by centrally planned countries. 2/ 1975: Equal to net import demand (excluding centrally planned countries) adjusted for loss in transit. 1966-68 average: Net exports, excluding those retained in centrally planned countries. - 20 - 1/ quotas.- It should be borne in mind., however, that the shares used for this purpose are necessarily current ones or, where available, those pre- determined for 1971. Even if, as has been assumed, market regulations will be extended to and beyond 1975, at least some changes in the distribution are bound to be made. Under the terms of the International Agreement quotas might be revised for the years 1972 and 1973; further revisions might be decided when the Agreement comes up for renewal. In the case of the United States modification of shortfall distribution - the expected partial allocation to domestic areas - is likely to lead to changes in the current proration of the remaining part among foreign sources of supply. There is no way of gauging the nature and extent of such changes; in the few instances where revisions can be anticipated, they have been taken into account. 45. Estimates of 1975 export shares for major individual countries and areas cover those under the International Agreement, the U.K. negotiated price quota, the U.S. import quotas, and also those under inter-African arrangements. They do not include exports of Cuba to and retained by cen- trally planned countries. A rough estimate of exports by Southern Rhodesia, which presently has no active quota under any of the existing arrangements, has been added. 46. Export shares under the International Agreement are expected to be equal to 100 percent of basic export tonnages set for 1971 (7.88 million tons)a/ plus entitlements for re-exports by centrally planned countries importing Cuban sugar (1.8 million tons),2/ which give a total of 9.68 million tons. Free market demand for 1975, including the adjustments for inventories and loss in transit mentioned above, comes to about 10 million tons. This leaves an undistributed margin of 0.32 million tons, which would allow for exports by non-members in excess of the quotas allocated to them, by Southern Rhodesia and by new exporters. 1/ For current (or 1971) quotas under the International Agreement and under special arrangements see Annex Table X-2. 2/ This figure includes basic export tonnages for members as well as for countries which have participated in the negotiations but are not mem- bers of the Agreement. Total export tonnages of such countries amount to some 5o0,o0 tons or 6.4 percent of the aggregate tonnages set for 1971. 3/ No account was taken of the export entitlements for Indonesia (up to 81,000 tons in any quota year) and for the Philippines (up to 60,000 tons in any quota year when the level of the aggregate of quotas in effect exceeds 100 percent of basic export tonnages). Indonesia is expected to remain a net importer; aggregate quotas in the mid-seventies are not expected to exceed 100 percent of basic tonnages. - 21 - 47. The U.S. shares were computed on the basis of initial import quotas set for 1970 which, including proration of the Cuban reserve, amaunt to roughly 3.75 million metric tons. (See Annex Table X-2.) The difference between this figure and the estimate for 1975 (4.45 million tons) has been distributed in line with the procedures prescribed in the U.S. Sugar Act. Allowance was made for the expected growth in exportable supplies from the Philippines, which should permit at least partial utili- zation of the country's share in the proration of deficits.2.. Moreover, the special treatment of the Dominican Republic in the allocation of deficits (ig accordance with the overriding clause which permits such treatment)i/ has been taken into account. 48. Distribution of export entitlements under the U.K. negotiated price quota (estimated at 1.8 million metric tons against 1.77 million for 1971) was computed by raising individual countries' shares in proportion to their 1971 quotas. 49. The quotas under the African and Malagasy Sugar Agreements, as well as exports within the East African Community, are included in the projections for "other" developing exporters of Africa. 5o. The projected distribution of market shares among major exporting countries and areas is necessarily conjectural and the results, shown in Annex Table X-3, should be regarded as rough indications, subject to a greater margin of error than those on global export demand. They permit, however, certain broad conclusions. Additional export demand would almost exclusively accrue to developing countries (see Annex Table X-3 and Table 6). This is primarily the result of the redistribution of exports in accordance with the shares negotiated under the International Agreement, but it also reflects the procedures of allocating additional import demand under the U.S. Sugar Act. In view of the large expansion expected in domestic consumption of developing exporters they also will have the most pronounced rise in production. Exports of developed countries as a group would actually remain below their 1966-68 level and those of centrally planned net exporters would remain virtually unchanged. Growth of produc- tion in these two groups of countries, confined to meet rising domestic demand, would be quite moderate. Prospects for major exporters 51. Turning to a brief review of prospects in major individual ex- porting countries, the main question is whether and how far the computed production levels would be compatible with known programs and likely 1/ Under current provisions the Philippines are entitled to supply 47.22 percent of any deficit arising in domestic or foreign sources of supply. In recent years the country has not been able to take advantage of this provision. 2/ The ordinary procedure may be overruled by the President. See Annex I, page 2, paragraph 4. - 22 - Table 6: SUGAR: TENTATIVE ESTIMATES OF DISTRIBUTION OF CONSUMPTION, EXPORT SHARES A PRODUCTION REQUIRED AMONG MAIN AREAS Iq 1975 COMPARED TO 1966-68 Estimates 1975 1966-68 average Consump- Export Prod.z' Consump- Net Produc- tion Shares Required tion Exports tioni/ --------------- (Million metric tons) ------------ Developing CubaY .70 2.15 465 .60 1.55 1.80 1.90 Other W. Hemisphere 10.80 5.00 15.95 7.65 4.50 12.25 Africa .40 1.10 1.50 .25 1.00 1.30 Asia and Oceania 6.10 2.60 8.70 3.70 2.35 5.80 Total Developing (excluding Cuba) 17.30 8.65 26.15 11.60 7.80 19.35 Developed 10.70 2.80 13.50 9.15 3.00 12.25 Centrally Planned 3.20 .75 3.95 2.70 .75 3.55 Unallocated .20 .20 Total Excluding Cuba 31.20 12.40 43.80 23.40 11.50 35.15 Including Cubai/ 31.90 16.35 48.45 24.00 14.95 39.15 Annual average growth rates (percent) Developing Cuba 1.6 4.3 1.8 Other 5.1 1.4 3.9 Developed 2.0 - 1.2 Centrally Planned 2.2 - 1.2 Total all exporters 3.6 1.1 2.7 Note: Totals may not add due to rounding. Growth rates computed before rounding. - 23 - Footnotes to Table 6 1/ Productic-. required in 1975 and actual 1966-68: totals and Cuban figures exclude amounts exported to and retained by centrally planned countries. Production estimates for 1975 (total and for some areas) include some allowance for addition to stocks in exporting countries. 2/ Cuba: exports for 1975 equal to basic export tonnages under the International Sugar Agreement (2.15 million tons) plus export and re-export entitlements of centrally planned countries importing Cuban sugar (1.8 million tons). Those for 1966-68 are exports to the free market plus re-exports by centrally planned countries importing Cuban sugar. Source: Based on Annex Table X-3. developments in the countries concerned. Obviously the programs of coun- tries whose exports are subject to restrictions under the International Sugar Agreement and other arrangements would take account of these res- trictions as well as of prospective domestic needs. But their own projec- tions in both respects may considerably differ from those presented here. Moreover, some countries may aim at and count on securing larger export shares when renewal or revision of existing arrangements will make possible at least some redistribution of quotas. $2. As mentioned earlier, production in Cuba during the current season has exceeded 8 million tons permitting - in addition to free market exports, direct and indirect, as provided for under the International Agreement - large shipments for domestic consumption in the USSR and other centrally planned countries. Decisions on future production will probably be determined in the main by prospective demand in these markets. Domes- tic needs in Cuba are comparatively small; most of the countryrs output is produced for export. $3. This also holds true for the Dominican Republic, where domestic consumption is absorbing less than one-fifth of production. For a number of years production showed a fairly stable trend, around .8 to .9 million tons, but starting in the mid-sixties the country experienced several very poor crops, mainly caused by adverse weather conditions. The 1969 crop was back to "normal" and some further increase is expected in 1970. It also has been reported that considerable capital has been invested to improve operations and to modernize existing mills.2/ According to present intentions, production in the near future will be raised to about 1 million tons. This will not require the addition of new mills or acreage and no such additions are planned. Exports in recent years have been entirely absorbed by the U.S.; apart from its basic quota and its share in the proration of the Cuban quota, the Dominican Republic has been allocated a "preferential" proportion of the Puerto Rican deficit. Under the expected modification of the deficit distribution the share in the latter would be much smaller, but the country is seeking an increase in its basic quota. The country also has a quota under the International Agreement. Even if it succeeded in securing a larger share on the U.S. market, both the U.S. and free market quotas as well as domestic require- ments could be comfortably met by maintaining production at about 1 million tons. 54. The West Indies and Guyana also produce sugar mainly for export, most of which is directed to the U.K. and the U.S. under special arrange- ments. Practically all of the group's free market exports are sold to Canada, where Commonwealth exporters have tariff preferences. Production required to meet expected needs in 1975 of about 1.4 million tonsi/ would 1/ USDA, Foreign Agricultural Service: Annual Report on Sugar, May 6, 1970, by Agricultural Attache in the Dominican Republic. 2/ See Annex Table X-3. - 25 - have to be raised only moderately, about 1 percent per year. All coun- tries in the group are attempting to develop alternative sources of foreign exchange, including tourism. In some of them the sugar industry has various problems, including labor shortage, for which solutions are being sought. Provided that present difficulties can be overcome, the minor rise in production needed to cover expected requirements could be achieved; it is unlikely, however, that output would be expanded beyond that level. 55. Peru is the only other major exporter in the Western Hemisphere whose exports exceed domestic consumption. However, the share of the lat- ter in total production is rapidly rising - from 35 percent in the late fifties to 45 percent in recent years. This trend is expected to continue further. Production over the past decade has remained fairly stable - around 750,000 to 800,000 tons. In order to bring production to the expected 1975 requirements of 1 million tons expansion at an annual average rate of some 3.5 percent would be needed. There is some doubt, however, whether this will be feasible. Under the agrarian reform program being carried out in the country, most of its large sugar plantations have been expropriated. Even though it is planned to farm the land as cooperatives under central government guidance, such a changeover causes, as a rule, at least temporary reduction in output. It is difficult to visualize recovery and the required rise in output being achieved by 1975. 56. In most other exporting countries of the Western Hemisphere the greater proportion of production, varying from about 70 percent in Mexico and Colombia to over 90 percent in Argentina, is domestically consumed. Prior to 1960, i.e., before gaining access to the U.S. market, a number. of these countries were only minor or sporadic exporters. This applies i.a. to Brazil, currently the second largest exporter of the Hemisphere, surpassed only by Cuba. Large expansion of Brazil's output, from 3.2 million tons in the late fifties to well over 4.2 million tona in 1967-69, has permitted a steadier and increasing flow of exports. In recent years they have reached over 1 million tons, of which more than half has been shipped under the U.S. quota. Domestic consumption is expected to main- tain its fast rate of growth, while exports in the mid-seventies, restric- ted by quotas, would not exceed their current level. There appears to be ample scope for further expansion of output through extending acreage, raising yields and perhaps also by diverting cane from alcohol to sugar production. Internal prices and production are controlled by the Sugar and Alcohol Institute and it is expected that output will be geared to cover rising domestic needs as well as demand for exports. 57. Production in Mexico increased even more rapidly - from 1.4 million tons in 1958-60 to 2. million tons in recent years - and, in spite of fast growing domestic demand, rising quantities have become available for export. By far the greater part of the country's exports have been absorbed by the United States; only about one-fifth have been sold on the free market. Although some further increase in export demand is expected by 1975, most of the additional production requirements will - 26 - arise from expanding domestic consumption.! To meet demand on both fronts production would have to be raised at an average annual rate of some 3 percent, considerably less than during the sixties. It has been reported that the Nexican sugar industry was in urgent need of moderniza- tion and re-structuring; but current domestic prices were not conducive for investment.2? In recent years the government has authorized special financing and seems to have assumed an active role in the program of re- structuring the industry. 58. Colombia has more than doubled production during the past decade and has become a net exporter of increasing quantities. The U.S. has been the largest single market for Colombian sugar, but nearly alf of the exports to this country have been "non-quota" at world prices.2 Like various other exporters, Colombia is seeking an increase in its basic quota; however, even if these efforts should succeed the expected changes in the proration of deficits make it unlikely that quota exports will rise beyond the level of recent years, i.e., some 60,000 metric tons. Domestic consumption is rapidly rising, partly because of growing urbanization and substitution of centrifugal sugar for "panela" which is widely consumed in rural areas. During 1969 Colombia has not fully utilized its quota under the International Agreement and it has been reported that a similar course will be taken in the current year. There is ample scope for ex- panding output and, if the country wished to do so, there should be no difficulty in meeting rising domestic consumption and making full use of its export quotas. 59. The share of Africa in total exports of developing countries is rather small and not expected to increase. Exports of Mauritius, the largest exporter in the group, would hardly rise beyond their level in recent years;!/ domestic consumption, although expected to grow, will remain very small both in absolute terms and in relation to exports. Practically no expansion of output would be required and, in view of the scarcity of suitable land, would hardly be sought. Swaziland, the second largest developing exporter of Africa, would have a modest incre se in exports; the rise in domestic consumption would also be small.2 With ample land resources available, the country could expand production far beyond what will be needed to meet domestic and export demand in 1975. The quotas of Southern Rhodesia under the U.S. Sugar Act and the Common- wealth Agreement have been suspended; the country is not a member and does not hold a quota under the International Agreement. Its exports, 1/ See Annex Table X-3. 2/ J. H. Christman: "Sugar Industry Goes Bittersweet", Mexican-American Review, November 1969. 3/ As mentioned earlier, such exports are admitted in limited quantities, for use as animal feed, production of industrial alcohol or re-export in sugar-containing products. - 27 - which were higher before, declined to about 65,000 tons in 1966-68 reflecting, no doubt, the limitation of export markets. The forecast used for 1975 - 90,000 tons - is not more than a rough guess, based in part on the country's earlier performance. Like other countries in the area, Southern Rhodesia has ample scope for expanding production and would have no difficulty in meeting anticipated domestic needs and export demand in 1975. 60. Exports of Asian countries have been stagnant through most of the sixties. The cessation of exports from Indonesia, after a brief and only partial recovery in the fifties, has already been mentioned. China (Taiwan), whose exports are mainly sold on the free market, has greatly reduced its previously high dependence on sugar trade; production, apart from minor year to year fluctuations, has remained much the same over the past decade. Domestic consumption absorbs about one-fifth of total output, most of which is exported. The International Sugar Agree- ment quota, together with the small quota on the U.S. market, will permit only a minor expansion of exports; even though domestic consump- tion should rise faster, only a modest expansion of output (not beyond the level reached V the mid-sixties) would be required to meet domestic and export demand.1 Unless free market prices should rise to much more attractive levels the country would hardly be tempted to aim at a greater expansion and a higher export quota. 61. In India, the largest producer of Asia, most of the sugar pro- duced is consumed in the country, only a small fraction being exported. Yet per caput consumption of (centrifugal) sugar remains very low and, according to recent reports, strong efforts are under way to expand output and consumption.-2' Measures have been taken by the government to encourage diversion of cane from the production of Gur (non-centrifugal sugar) to the centrifugal sugar industry. Moreover, sugar beet is now grown on an experimental basis; should this prove successful, an additional source could be opened, which in a few years could augment sugar derived from cane. It nevertheless is doubtful whether the original consumption target of 5.3 million tons by 1975 can be reached. Consump- tion projected in this paper is lower - 4.6 million tons by 1975. Produc- tion required to reach this level and to meet the country's modest export quotas would have to rise to nearly 5 million tons as against 3.2 million on the 1965-69 aver4age, implying an annual growth rate of about 5.6 per- cent.-' This would be more than twice the average rate (2.6 percent) in 1/ See Annex Table X-3. 2/ See C. Czarnikow Ltd., Sugar Review Ho. 954, January 22, 1970. 3/ Production in 1967 and 1968 was severely reduced by drought; it therefore appeared more realistic to use the broader five-year average 1965-69, which includes two years with "normal" and one with very high production. - 28 - the preceding eight years (1957-61 to 1965-69); yet the great efforts being made toward raising output and the record 'Level of nearly 4.2 million tons attained in 1969 suggest that expansion to an average of 5 million tons in the mid-seventies is well within reach. 62. The Philippines are exporting the greater part of their produc- tion. For many years their sugar has been sold exclusively to the United States under the preferential conditions provided for under the Agreement with the U.S. and the U.S.. Sugar Act.!/ Yet production in the Philippines has been virtually stagnant through the sixties while domestic demand has been rapidly rising. As a result, the country has found it increasingly difficult to fill its quota (1,020,000 metric tons) and, indeed, has not been able to take advantage of its entitlement to supply some 47 percent of any deficit in the quotas of other suppliers. Eager to maintain its privileges on the U.S. market, the country is aiming at a gradual expan- sion of output, mainly -hrough establishing a number of new mills. Produc- tion in 1970, forecast at some 1.8 million tons, should enable the country to supply part of its share in the current deficit. The expected modifi- cation of the proration of deficits after 1971 would greatly reduce allo- cations to foreign suppliers; moreover, distribution among the latter might be altered. There is no way of predicting how this would affect the share of the Philippines. N'-or is it possible to forecast whether and to what extent the country's basic quota might be raised. The projection used for 1975 ,as been arrived at by adding 100,CO tons to the present basic quota..2. Domestic consumption, which continues to rise through population growth and increasing per caput intake, is expected to reach 920,000 tons. Production in 1975 required to cover domestic needs and the projected share on the U.S. market would have to reach 2.04 million tons, somewhat less than the country's own target of 2.1 million for 1974. Taking into account that the figure of 2.04 million tons does not allow for addition to stocks the difference is quite small; moreover, the share on the U.S. market may have been somewhat underestimated. It should be added, however, that the "free market" is not likely to provide an addi- tional outlet. The export entitlement of up to 60,000 tons under the International Agreement would apply only when aggregate quotas in effect exceeded 100 percent of basic export tonnages; it is not expected that this will be the case. 63. Production in Fiji has increased from some 200,000 tons in the late fifties to some 350,000 tons in recent years, most being exported. Roughly half of the island's exports move to the U.K. and U.S. at special 1/ For details on the determination of the Philippine quota under the U.S. Act see Annex I, page 2. 2/ The figure of 100,000 tons would be roughly equal to 47 percent (i.e., the current share of the Philippines) of the deficit proration to foreign suppliers expected in the mid-seventies; it would not allow for an increase in the basic quota. - 29 - prices, the balance being mostly shipped to Canada and New Zealand. Quotas under special arrangements and the International Agreement provide little scope for further expansion; production, however, could be raised considerably through improving yield on present acreage and with existing milling capacity; the industry has been described as efficient and well organized. 64. Nearly one-fifth of net exports in recent years have been sup- plied by developed countries, notably Australia and South Africa. Australia has greatly expanded production and exportable supplies over the past fifteen years. Up to 1953 production amounted to less than 1 million tons and the greater part was consumed in the country., Subsequently production rose much faster than domestic needs; this movement gained further momen- tum thragh the admission of Australian sugar to the U.S. market and through the temporary price boom in the mid-sixties. In recent years output has emceeded 2.5 million tons and hardly more than 25 percent has been consumed in the country. .Mechanization of cane cutting on a large scale has reduced cost of production, yet there remains a sizeable high cost sector and during the last few years of depressed world prices pro- duction has been heavily subsidized. The quota under the International Agreement places a limit on market outlets and the present policy of the country is to eliminate high-cost production, thus bringing down total output to anticipated export opportunities and domestic needs. However, there are also plans, perhaps of longer range, to raise efficiency in the high-cost sector; there can be no doubt that the country could, without difficulty, expand production to and beyond the level of recent years if this were called for by market developments. 65. South Africa is renowned as a low-cost producer with ample resources for further expansion. Exports have rapidly increased through the sixties; those under special arrangements are confined to compara- tively minor quantities under the U.S. quota, the bulk being sold on the free market. But these latter exports will have to be scaled down to the quota accepted under the International Agreement. However, domestic consumption is growing fast and a rising proportion of output will be absorbed within the country. Hence, even though exports are likely to remain well below the 1966-68 level, the expected advance in domestic requirements will call for a moderate expansion of output. In view of the ample resources in the country a much greater expansion would, no doubt, be feasible. 66. The EEC group, the main exporter which participated in the nego- tions but did not join the Agreement, had been offered a basic export ton- nage of 300,000 tons. In addition, the French Overseas Departments in the West Indies have a quota on the U.S. market of about 60,000 tons. Although net exports of the group (including those under the U.S. quota) amounted in recent years to only 240,000 tons,1/ the heavy subsidies on production and 1/ EXports of the group have shown wide year to year fluctuations; in 1967 the group actually was a net importer of some 90,000 tons against net exports of 170,000 tons and 64o,ooo tons in 1966 and 1968 respectively. - 30 - trade under the Common Market sugar policy could produce exportable sur- pluses well in excess of those in previous years. However, the consider- able financial burden caused by present arrangements suggests that the latter will be revised; although attempts in that direction have been made, they have not yet succeeded. It is to be expected that efforts will be renewed and it is not uneasonable to assume that exports by the group in the mid-seventies would not, or not appreciably, exceed the International Sugar Agreement tonnage offered plus the U.S. quota assigned to the French Wst Indies. Nevertheless, the lack of a commitment to that effect does leave an element of uncertainty concerning the group's future exports. Even though average exports may remain close to the International Agreement and U.S. quotas, it cannot be taken for granted that this would also hold on a year by year basis, and the danger of at least some dis- turbances through larger exports in any particular year cannot be ruled out. 67. Denmark has made it known that production will gradually be adjusted to cover domestic requirements only. Although the country's quota is small - 41,000 tons - its relinquishment would permit some ex- pansion in other countries' exports. 68. Basic export tonnages for the net exporting centrally planned countriesl' will leave their exports at much the same level as in 196-68. However, in these countries net exports have absorbed not more than 15-30 percent of total production, the greater part being absorbed by high and rising domestic consumption. Domestic requirements are expected to rise further and to call for expanded production; exports from Hungary, the smallest exporter of the group with a quota of 51,000 tons, have been falling off in recent years and it has been reported that the country will become a net importer. This would again permit some expansion in other countriest quotas, possibly within the centrally planned group. 1/ Czechoslovakia, Hungary, Poland and Rmania. The last mentioned country (with a quota of 46,000 tons) has not joined the Agreement. - 31 - III. PROSPECTIVE DEVELOPMETS ON THE WORLD MARKET 69. By combining the forecasts for net exporting and importing areas!/ a more comprehensive view can be gained of prospective (as com- pared to past) developments on the world sugar market. World consumption between 1966-68 and 1975 is expected to increase by some 17 million tons, slightly more than in the preceding eight-year period (see Table 7). The expected rise in production by 16 million tons would be much the same as in the preceding eight years. Total production of some 81.5 million tons in the mid-seventies would cover consumption and permit gradual upward adjustment of working stocks; the apparent production surplus in the two preceding periods would disappear. The projected balance between consump- tion and production in 1975 is not accidental: :it results from the method used in projecting production in net exporting countries (domestic consump- tion plus export requirements plus allowance for stock adjustment). As pointed out earlier, it is to be expected that exporting countries, iq planning their production, will be guided by similar considerations. ? 70. The future growth rates of both world consumption and produc- tion will be lower than they were in the eight-year period preceding 1966-68. As indicated by the data in Table 8, the slowdown will be most pronounced in the centrally planned countries where consumption and output had sharply advanced in the earlier period. Production developments in these countries are closely linked with those of Cuba. Should Cuba's output be maintained at not less than some 7.5 million tons, thus per- mitting a larger and steadier flow of exports to this grcup, production of the latter is expected to expand only moderately; additional consump- tion would be largely met by supplies from Cuba. 71. The decline in the growth of consumption in developed countries reflects, in part, a lower rate of population growth anticipated for the second period, but also the high level of per caput consumption in many countries of that group, which limits the scope for further increase. Epansion of output in the group will also slow down, largely as a result of expected developments in Australia and South Africa, where the sharp advance in the earlier period will be severely restricted through the export limitations under the International Sugar Agreement. 1/ The data in this section refer to "most likely" estimates; for Cuba and the centrally planned countries the midpoint of the ranges shown has been used. The figures for developed and for developing countries in Table 7 are slightly higher than the sum of "net importing" and "net exporting" countries in Section II. They include data for three countries - Austria, Burma and Tanzania - which have become self-sufficient in recent years. Production, roughly equal to consumption, of these three countries in 1966-68 amounted to 320,000 tons, 70,000 tons and 75,000 tons respective- ly. Data for these countries have been included in order to round out world totals. 2/ See discussion on pages 3 and 21 above. - 32 - Table 7: SUGAR: PROJECTED CONSUMPTION AND PRODUCTION BY MAIN AREAS IN 1975 COMPARED TO 1958-60 AND 1966-68 AVERAGES (Million metric tons) Consumption Production 1958-60 1966-6d 1975 1958-60 1966-63 1975 Developed 23.1 28.55 33.8 16.3 21.8 24.9 Developing (excluding Cuba) 13.2 18.2 26.3 17.0 22.1 30.85 Cuba .3 .6 .7 5.85 5.5 7.5 Centrally planned 10.5 16.4 20.25 10.3 16.1 18.3 World 47.1 63.75 81.05 49.45 65.5 81.55 Sources: 1958-60 and 1966-68 data: International Sugar Organization Sugar Yearbook, various issues. USSR Central Statistical Administration: Official Statistical Yearbook, various issues. Table 8: SUGAR: ANNUAL AVERAGE GROWTH IATES AND CHAGES IN THE SHARES OF HAIN AREAS IN WoRLD CO7BUMTPTION AND PRODUCTION, 1958-60 TO 1975 Annual average growth rates, percent Percent share in world total Consumption Production Consumption Production 1958-60 1966-68 1958-60 1966-6d to 1966-8 to 1975 to 1966-8 to 1975 1958-60 1966-68 1975 1958-60 1966-68 1975 Developed 2.7 2.1 3.7 1.7 49.0 44.8 41.7 32.9 33.3 30.6 Developing (excluding Cuba) 4.0 4.7 3.3 4.3 28.0 28.5 32.4 34.4 33.7 37.7 Cuba 9.1 1.5 - 4.0 .7 1.0 .9 11.9 8.4 9.2 Centrally Planned 5.7 2.6 5.8 1.5 22.3 25.7 25.0 20.8 24.6 22.5 World Total 3.8 3.1 3.6 2.8 100.0 100.0 100.0 100.0 100.0 100.0 Source: See Table 7. - 34 - 72. In the developing countries (excluding Cuba) both conaumption and production growth will accelerate, the latter mainly in order to meet additional domestic requirements. Population growth in these countries is anticipated to continue at the high rate of 2.5 percent per year; moreover, with the notable exception of the Western Hemisphere, per caput consumption in most of the developing countries is very low, leaving ample scope for further increase. 73. As a result of the wide differences in the growth rates of major areas, there will be a marked shift in the distribution of both world consumption and production. The downward trend in the proportion of sugar consumed by developed countries will continue. This group, with some 20 percent of world population, accounted in the late fifties for almost half of world sugar consumption. This high proportion has gradually diminished and is expected to decline further to about 42 percent in the mid seventies. The share of developing countries, which has hardly changed in the sixties, is expected to advance considerably - from 28.5 percent to 32.4 percent between 1966-68 and 1975. Little change is expected for centrally planned countries. 74. On the production side the shares of Cuba and of other develop- ing countries will gain, while those of the other two groups, for reasons discussed earlier, will decline. International trade 75. As pointed out in Section C above (see Table 5), by far the greater part of additional production in exporting countries will be required to meet growing domestic consumption; the rise in export demand will be rather small. Hence production consumed in exporting countries will absorb a larger proportion of their output, increasing from about 60 percent in 1966-68 to some 66 percent in the mid-seventies. This development corresponds to the trend in importing countries, where the share of consumption met by domestic production is expected to grow from 46 to 49 percent. The secular trend of a declining share of trade in world production and consumption will thus continue. 76. No change is expected in the roundabout way of sugar trade which has developed following the cessation of U.S. imports from Cuba. The greater part of Cuban sugar will continue to be shipped to the USSR and other centrally planned countries and partly be re-exported to the free market. The area distribution of U.S. and U.K. imports under their special arrangements will remain much the same, though some shifts in U.S. quotas for individual countries may occur. 77. As indicated in Table 9, which provides a rough indication of the 1966-68 and the projected 1975 network of trade among major areas, some two-thirds of developing countries' exports have been absorbed by the U.S. and the U.K. under special arrangements, at prices far above the prevailing world price level. Since import demand by these two countries is expected to grow more slowly than demand on the free market. - 35- hIg: SUGAR: EXPORTS BY MAIN AREAS, AT SPECIAL PRICES AND TO THE FREE MAKE1l (illion metric tons) To At special Percent shayc omrices Free Centrally in special U.S. U.K. Market / Planned / Total price markets ---------------------1966-68---------------- 1rt Exports: Developed .3 .35 2.35 - 3.0 22 Developing excluding Cuba 3.85 1.40 2.55 - 7.8 69 ,uba - - 1.55 3.35 4.9 68 Centrally Planned - - .75 - .75 - -e:rports by Cen- 'rally Planned - - 1.9 - 1.9 - 4ld 4.15 1.75 9.10 1.45 16.45 ...cluding net imports oy Centrally Planned 4.15 1.75 9.10 14.95 ------------------ - -1975------- ---- ? t24 Exports: Developed .3 .35 2.15 - 2.8 23 Developing excluding Cuba 4.15 1.45 3.25 - 8.85 64 (Iba - - 2.15 4.65 6.8 68 Centrally Planned - - .75 - .75 - R-exports by Cen- trally Planned - - 1.8 - 1.8 - 4.45 1.80 10.10 2.85 19.15 x>;luding net imports by Centrally Planned 4.45 1.80 10.10 16.35 Note: Totals may not add due to rounding. j{ Includes .12 million tons of inter-African trade under special arrangements- 2/ Cuban exports to centrally planned countries move under bilateral agreemense at agreed prices. The export figure for 1975 of 4.65 million tons, as well as the figure for retained imports of 2.85 million tons, does not represen'i the "most likely" estimates but is simply the mid-point of the range given in Table 3. Sourcet International Sugar Organization, Sugar Yearbook, various issues. - 36 - the proportion of developing countries' exports sold at "special prices" will decline. Shifts in the distribution of free market shares will be largely the result of the quota allocation under the terms of the Inter- national Sugar Agreement. Exports of developed countries will be re- duced, both in relative and absolute terms. There will be a minor decline in the share of centrally planned net exporters but no change in the export volume. The greatest gain will accrue to Cuba, whose share in direct exports will rise from 17 to almost 22 percent; re-exports via centrally planned importers of Cuban sugar will slightly decline. Developing countries other than Cuba will also gain; their share in free market exports is expected to advance from 28 to 32 percent. Prices 78. Free market prices through the sixties have been subject to violent gyrations (see Table 10). The sharp advance in 1963 was caused in the main by a temporary, stringent shortage, following two consecutive crop failures in Cuba and uncertainty about future developments in that country. Accelerated and unrestricted expansion of output in nearly all areas17 led to large and persistent surpluses, which in turn were respon- sible for the steep and protracted downturn of prices. Recovery in 1969 may be credited, in part, to the resumption of operations of the Inter- n&,ional Agreement,Z/ but it also reflected improved market conditions. 79. U.S. prices, though not rigidly fixed, are maintained through quota manipulations which aim at a "price objective" rising with the U.S. farm parity index. (See Annex I, page 2.) The (f.o.b.) price received by exporters differs from the domestic price by the amount of duty (0.625 cents per pound), freight and insurance. The data in Table 10, which state prices in f.o.b. terms, indicate that they have been gener- ally well above the world price level. 80. The Commonwealth price paid for U.K. imports under the nego- tiated price quota is agreed between the U.K. and Commonwealth exporters at intervals for a number of years in advanceS2 The price is stated in sterling and the reduction in 1968 and 1969, in terms of cents per pound, reflects the devaluation of the pound late in 1967. 1/ Suspension of the International Sugar Agreement in 1961 also removed limitations on expansion of output. 2/ The present Agreement aims at maintaining prices within a range of 3.25 to 5.25 cents per pound f.o.b.; prices during 1969 were thus close to the lower limit of the range. 3/ The basic price is currently L43.10.0 per long ton, bulk, f.o.b. Developing countries receive in addition 11.10.0 plus a variable bonus - varying inversely with world market prices. The series given in Table 10 refer to prices received by developing Commonwealth ex- porters (presently all except Australia). - 37 - Table 10: SUGAR: PRICES1/ ON THE INTERNATIONAL MARKET (U.S. cents per pound) Unit value "Worldi U.S. Common- (developing wealth_2/ countries) 1960 3.14 5.35 5.44 1961 2.70 5.34 5.52 4.75 1962 2.78 5.56 5.61 4.83 1963 8.29 7.28 5.64 6.50 1964 5.72 5.98 5.64 6.48 1965 2.03 5.80 5.82 4.66 1966 1.76 6.o4 5.94 4.64 1967 1.87 6.32 5.94 4.74 1968 1.85 6.54 5.10 4.67 1969 3.20 6.75 5.10 1970 January-May 3.35 6.88 1/ F.a.s. or f.o.b. Caribbean or Brazilian ports. 2/ Starting in 1965 the figuresinclude the special payments to develop- ing countries introduced in that year. Sources: International Sugar Council Sugar Yearbook and Monthly Bulletin, various issues. USDA Sugar Report, various issues. FAO State of Food and Agriculture and Trade Yearbook, various issues. - 38 - 81. Concerning future developments it appears safe to assume that the U.S. price will continue to move with the farm parity index and, in all likelihood, continue its slow upward movement. The U.K. price has been set with the aim of providing exporters with a "remunerative" return; it has changed very little over the last decade and may be ex- pected to be maintained between 5 and 6 cents per pound. 82. The fate of the free market price will. largely depend on the ability of the International Sugar Agreement to keep exports (and export- able production) in line with import demand. The production estimates presented in this paper are based on the assumption that this will be the case. As indicated earlier, import demand on the free market will be on a level which would call for export quotas close to or at 100 percent of basic export tonnages.1. Under existing International Sugar Agreement provisions quota adjustments are linked to prevailing market prices; quotas equal to 100 percent of basic tonnages would correspond to a market price of around 4 cents per pound. It may be concluded on this basis t at average prices in the mid-seventies will be close to that level. 2 83. The "forecast" of a free market price of some 4 cents per pound has obviously not been derived as the equilibrium level which would equate demand and supply on the residual market. As pointed out earlier, import demand is highly inelastic and the estimated volume would remain much the same within a price range of, say, 3 to 4.5 cents per pound. This leaves the question whether at a price of some 4 cents per pound an additional export volume of about 1 million tons (as compared to the 1966-68 average) would be offered. 84. In approaching this question it should be recalled that the increment in free market demand accounts for onLY a small fraction - some 11 percent - of the additional demand from all sectors of the market, including domestic requirements in net exporting countries. The latter account for about 85 percent; the remaining 4 percent represents increas- ing demand under special arrangements.2/ Hence the average return per unit of additional output by net exporting countries as a group will be heavily weighted by their domestic prices. 1/ Since January 1969, when the new Agreement started operations, quotas have been held at 90 percent of basic export tonnages. Shortfalls of participating exporters during 1969 have not been redistributed; hence aggregate effective export quotas in that year were as low as 80 per- cent of basic tonnages. 2/ The provisions of the Agreement do not allow for changes in the general price level; the prices referred to as well as the average price expectcd to prevail in the mid-seventies are expressed in terms of actual prices, 3/ See Tables 4 and 9. The figures do not include additional demand for sugar to be retained in net importing centrally planned countries. - 39 - 85. However, as indicated earlier, the distribution of additional demand by market sectors varies widely among individual countries. A number of them, notably the net exporters in the Caribbean, several African countries and Fiji, are producing mainly for export; domestic consumption (of less than 15 percent of output) and its growth are quite small and average returns per unit of additional sales would come close to the free market price.17 In China (Taiwan) and Australia the percent- age of output consumed i the country is somewhat higher - some 20 and 27 percent respectively 2 - and if in expanding output these ratios were maintained, the weight of the domestic price would be greater than in the other countries mentioned. 86. If it were assumed (a) that any increase in output of countries mainly producing for export would require the establishment of additional mills and expansion of acreage and (b) that total cost per unit (i.e., variable plus interest and amortization over say 15 to 20 years) would have to be covered by the free market price (or a price fairly close to that level), one could safely maintain that a free market price of 4 cents per pound would hardly be sufficient.!/ However, neither of these assump- tions is realistic. 87. Even within the group of countries here mentioned, additional exports of about 1 million tons could in fact be supplied, wholly or largely by fuller utilization of existing mill capacity and probably also without much, if any, expansion of acreage. This would require, however, a distribution of additional expo s different from the pattern of shares under the tbernational Agreement.l So long as prices would have to 1/ This would not apply for Cuba, as part of additional exports would go to centrally planned countries at prices higher than 4 cents per pound. For others, additional exports to special price markets, if any, would be negligible. 2/ The percentages refer to the 1966-68 average., See Annex Table X-1. 3/ Variable costs differ widely among individual countries and areas; the same would apply to the cost of expanding acreage. A rough indication of the cost per ton of establishing new mills can, however, be gauged from data on investment in additional mills in a number of countries. Provided utilization at full capacity, the average cost per ton ranged from $280 to $315. Based on a price of $300, an interest rate of 7 per- cent and equal payments over 20 or 15 years, annual debt service would amount to roughly $28 or $33 per ton (i.e., about 1.3 to 1.5 cents per pound). This would leave less than 3 cents to cover variable costs plue those for investment in additional acreage; scattered data on production costs suggest that these costs could not be met at a price of K cents per pound. 4/ As discussed earlier, current mill capacity and acreage in most of the countries under consideration would be sufficient to expand exports evet beyond their prospective shares. Australia, under the terms of tl t r ment, actually had to cut back production and exp'rts on a si.zeabIe 3c at - 40 - cover variable costs of operation and maintenance, which on the margin may be quite low, countries would find it profitable to expand exports at a price of 4 cents per pound. 88. With respect to those countries for which expansion of produc- tion will primarily be required to meet growing domestic needs, there can be no doubt that the majority will have to add new mills and probably expand acreage. But here average returns on additional production will come close to the domestic price, which as a rule is higher than 4 cents per pound. As in the past, some countries would cover losses on exports by charging higher prices to domestic consumers; some would subsidize both domestic consumption and free market prices and some may choose not to utilise their free market quotas. Any such deficits could easily be prorated to other countries, eager to expand their exports. 89. In the majority of exporting countries, where the sugar market - for domestic consumption as well as for exports - is strictly controlled by the governments, decisions to expand exports will not, be based on the marginal but rather on the average price received. Most of the develop- ing countries export the greater part of their sugar trade under special arrangements to the U.S. and the U.K., where prices in 1975 should be around 7 to 8 cents per pound and 5 to 6 cents per pound respectively; hence the average should be close to 6 cents, a price which would be profitable for most if not for all exporting countries. 90. The foregoing considerations strongly suggest that at a "free market" price of 4 cents per pound, demand on that market would be fully met. Summary of Main Arrangements Regulating Trade on the International Sugar Miarket 1. The following summary of special arrangements between major trading areas and of the International Sugar Agreement is not intended to be exhaustive; it is largely confined to the features which are relevant, in connection with the medium-term projections presented in the main part of the paper. The U.S. Sugar Act 2. Sugar imports into the United States as well as domestic (main- land and offshore) supplies are regulated by the U.S. Sugar Act. Initially adopted in 1934, the Act was renewed in 1948 and has since been repeatedly amended and revised, last in 1965 when it was extended to the end of 1971. The essential features remained unchanged: prospective requirements, es- timated by the Secretary of Agriculture for each calendar year (subject to later revision) serve as a basis for quota allocation. Specific quotas are assigned to mainland and offshore producers (Hawaii, Puerto Rico, Virgin Islands) as well as to the Philippines; the remaining balance is allocated to other sources of supply. Up to 1960 over 95 percent of this balance was supplied by Cuba. Following suspension of imports from that source, import quotas were reallocated, largely to other Western Hemis- phere countries, but also to Australia, South Africa, China (Taiwan) and sane other African and Asian exporters. Provisions relating to realloca- tion have been repeatedly revised. Under the latest (1965) amendment 50 percent of the market not assigned to domestic producers and the Philip- pines remains reserved for Cuba; the other half has been permanently allocated to (29) other countries. The reserved part has been prorated to the same countries - designated as temporary quotas - subject to cancella- tion if relations with Cuba should be resumed. If countries importing into the U.S. fail to fill their quotas (except for reasons beyond their control) they are subject to penalties in the form of permanent quota reductions by the amount of the shortfall. Moreover, under the 1965 amendment importing countries have to give advance assurances that they will fill their quotas, 3. Any increase in requirements is distributed between domestic (including offshore) and foreign suppliers in the proportion of 65:35 per- cent.'1 The current procedure is laid down in the 1965 amendment,!7 which 1/ The 65 to 35 percent ratio has been in force since 1962. Previously t4lc share of domestic producers in increments of requirements was 55 percent. 2/ The 1965 amendment provides for upward adjustments in the quotas of Hawaii and Puerto Rico in case production in these areas exceeds theiz basic quotas; such adjustment would reduce the balance (of 35 percent) to be allocated to foreign suppliers. However, in view of the mountirc_ shortfalls in Puerto Rico allocations to foreign suppliers have actus - ly been greater than envisaged in the amendment. AINEX I Page 2 assigned to domestic producers a global basic quota of 6,390,000 short tons with the provision that 65 percent of any increase in requirements beyond 10,00,000 tons would be allocated to domestic areas. The specific quota of 1,050,000 tons assigned to the Philippines in 1962 will be raised, under the terms of the 1965 amendment, by 10.86 percent of any increase in requirements between 9.7 and 10.4 million short tons. Quotas for other foreign countries are established on the basis of fixed percentages, also laid down in the 1965 amendment to the Act. 4. Shortfalls (deficits in quotas), whether in domestic or foreign areas, are reallocated under current provisions entirely to foreign sources of supply.!/ Deficits in domestic areas and in the Western Hemis- phere have to be assigned to the Philippines (47.22 percent) and Western Hemisphere countries; the latter would also supply any shortfall occurring in the Philippines. Deficits of other Eastern Hemisphere countries would be allocated to the Philippines (47.22 percent) and the balance to other Eastern Hemisphere countries. The President may, however, override these rules and, if it is in the national interest, allocate any deficit or part of it to countries holding quotas, as he finds appropriate. 5. The U.S. price of raw sugar (which has to be adjusted by sub- tracting the duty of .625 cents per pound2/ as well as by freight and insurance, and by adding bag allowance in order to arrive at the f.o.b. equivalent) is not rigidly fixed. The USDA determines for each month a "price objective" on the basis of the 1957-59 average price of 6.2 cents per pound, adjusted by the parity index; it then undertakes, through quota manipulations, to maintain actual prices close to the "objective". This has, as a rule, been achieved; occasionally, however, most recently in 1963, when the high level of the "world" price made exports to other areas highly attractive, the U.S. price had to be allowed to exceed the "objective" in order to obtain sufficient supplies. The Commonwealth Sugar Agreement 6. Current provisions regulating sugar trade between the U.K. and Commonwealth sugar exporting countries date back to the Agreement of 1951, which in turn replaced previous wartime and early postwar purchase ar- rangements. The 1951 Agreement provided for mutual obligations for the U.K. and participating Commonwealth exporters to purchase and sell speci- fied quantities of sugar at a negotiated price (N1egotiated Price Quotas). 1/ This provision, under which the total Puerto -ican shortfalls have been allocated to foreign sources of supply, is expected to be changed at the next (1971) revision of the Act. 2/ Currently the rate for sugar imports from the Philippines is lower (.3 cents per pound) but is gradually being raised and by July 1974, the expiration date of the present U.S.-Philippines Trade Agreement, should reach the general (.625 cents) level. ANNEX I Page 3 These quotas, originally set at 1,568,000 long tons, have been repeatedly raised in line with increasing U.K. consumption (of which they cover roughly 60 percent) and revised to take account of changing membership. For the years 1969 to 1971 inclusive the aggregate Negotiated Price Quota amounts to 1,7ti72,000 long tons (1,770,000 metric tons) per year; this figure includes the quota for Southern Rhodesia of some 25,000 tons, presently suspended. 7. The initially adopted base price (c.i.f. London) has been sub- ject to annual review and to adjustments in accordance with cost of pro- duction and other relevant price developments. In 1965 provisions relating to price determination were revised; moreover, starting in 1966 prices have been expressed on an f.o.b. basis and fixed for a period of three (in lieu of one) years. The price for the three years 1969 to 1971 remains at its previous level of L43.10.0 per long ton.17 Developing member countries (presently all except Australia) receive in addition special payments, re- placing benefits formerly derived under the "Colonial Certificate" system. These payments consist of a fixed and a variable element, the former amounting to 1l.10.0 per long ton; the other component varies inversely with world market prices from 12.10.0 at a world price level of less than T31.0.0 to nil when the latter reaches n39.0.0. / 8. A second set of quotas (Overall Agreement Quota, presently 2,780,000 long tons) which encompasses the Negotiated Price Quota, has the function of limiting total exports of participating Commonwealth exporters to preferential markets - the U.K., Canada and New Zealand. It does not entitle exporters to any benefits other than those arising from tariff preferences accorded to Commonwealth countries. Sales to Canada, New Zealand and to the U.K. beyond the Negotiated Price Quota move at the world price. 9. The Agreement, originally concluded for a period ending December 31, 1959, has been extended, in accordance with its provisions, in each subsequent year by another year - in 1952 to the end of 1960, etc. It was extended in 1966 to December 1974; further extension in 1967 was omitted in view of the pending application for admission to the Common Market. 10. At the last meeting between the parties to the Commonwealth Agreement, in November-December 1968, the provisions concerning duration were revised and, subject to certain qualifications, its duration will be indefinite. In the event of successful completion of negotiations for the accession of the U.K. to the Cafon Harket, contractual obligations under 1/ Equivalent to 5.44 U.S. cents per pound prior to, and 4.66 cents per pound after devaluation of the pound. The price in terms of the pound sterling has remained unchanged. 2/ Including special payments the equivalent in U.S. cents per pound amounts to 5.94 before and to $.09 after devaluation of the pound. ANIJEX I the Agreement cannot be continued after December 31, 1974. However, in that case the U.K. would consult with the other parties to the Agreement "with a view to seeking means of fulfilling the objectives which those obligations would otherwise fulfil."./ When the U.K. applied for member- ship in the Common Market in 1967 the need for provisions to that effect were stressed. The subject was again brought up recently when discussions of U.K. accession to the Common Market were resumed. Agreements between Cuba and centrally planned countries 11. Trade between Cuba and the USSR moves under a five-year Agree- ment, covering the period 1965 to 1970. The USSR has agreed to purchase increasing quantities; during each of the years 1968 to 1970 the volume to be taken was set at 5 million tons. So far, actual trade has remained well below the agreed figure. The price was fixed at the equivalent of 6 U.S. cents per pound, f.a.s. Cuba; it has been reported that 20 per- cent of imports would be paid in convertible currency, the rest on a strictly bilateral basis. In addition to the contract with the USSR, Cuba has bilateral agreements with other centrally planned countries, at prices reportedly between 5 and 6 cents, f.a.s. Cuba. The International Sugar Agreement 12. Operations of the first postwar sugar Agreement, concluded in 1953 and renewed in 1958, were suspended at the end of 1961, when it proved impossible to accommodate the greatly increased free market quota requested by Cuba subsequent to the cessation of U.S. imports from that country. After previous abortive attempts to revive the Agreement, negotiations held in 1968 were finally successful. Like its predecessors, the new Agreement, which came into force on January 1, 1969 for a period of five years, aims primarily at maintaining prices within a certain range. Although not specifically spelled out, the relevant provisions of the Agreement imply a range within the limits of 3.25 and 5.25 cents per pound. 13. The mechanism of export quotas, intended to keep prices within the range indicated above, is similar to the one applied in previous Agree- ments. Basic export tonnagesi/ for individual exporters, established in 1/ The Commonwealth Sugar Agreement, Text of 1968, page 7. 2/ The terr "basic export tonnages" refers to shares in the free market, expressed in metric tons. The tonnages for individual exporters are shown in Annex Table X-2. No basic export tonnages have been estab- lished for Indonesia or for the Philippines. Indonesia, which since 1967 was a net importer, will be entitled to net exports of up to 81,000 tons in any quota year, not subject to any adjustments. The Philippines, which had not exported to the free market for many years, will be en- titled to export up to 60,000 tons in any quota year, provided that the aggregate of quotas in effect exceeds 100 percent of basic export toa- nages. AIEX I the course of the negotiations and forming an integral part of the Agree- ment, serve as a guide for allocation (and subsequent adjustment) of annual export quotas. Depending on price movements quotas could be below or could exceed basic export tonnages. A complex set of regulations pro- vides for adjustment of quotas to varying price levels. If the prevailing price exceeds 5.25 cents per pound quotas become inoperative; in case of a decline to less than 3.50 cents per pound quotas shall not be higher than 90 percent of basic export tonnages; when the price reaches 3.25 cents per pound a further reduction (not exceeding, however, 5 percent of basic export tonnages) is foreseen. At a price exceeding 4 cents per pound ag- gregate quotas should not be less than 100 percent of basic export ton- nages; in case of a decline to less than 4 cents per pound quotas should be reduced by 5 percent./ Some of the regulations, e.g., suspension of quotas if the price exceeds 5.25 cents per pound, are mandatory, with respect to others it is left to the discretion of the Council-/ to take a different decision. 14. Following the pattern of earlier Agreements, trade under special arrangements - exports to the United States, to the United Kingdom within the negotiated price quota under the Commonwealth Agreement, exports of Cuba to centrally planned countries as well as trade under the Afro-Malagasy Sugar Agreement - will not be charged to quotas under the International Agreement. 15. The difficulties arising from large-scale re-exports to the free market of Cuban sugar imported by the USSR and other centrally planned countries have been resolved through commitments undertaken by these coun- tries and by Cuba, to keep re-exports within agreed limits: (a) The USSR will limit re-exports to the free market to 1.1 million tons in 1969; the corresponding limit for the following two years will be determined by the Council but should not be less than 1.1 million or more than 1.25 million tons. (b) Exports of Cuba to Czechoslovakia, Hungary and Poland in excess of 250,000 tons in each quota year will be charged to Cuba's free market quota. 1/ This is not an exhaustive list of all regulations; the ones mentioned here only refer to the (practical) limits and the approximate midpoint of the range. 2/ The Council, consisting of all members of the Agreement, is the highest executive authority; it is entitled, however, to delegate a number of functions (but not including the determination of quotas) to the (narrower) Executive Committee. ANTIEX I Page 6 (c) Exports by Eastern Germany and China (Mainland) in any quota year, in excess of 300,000 tons, will be deducted from Cuba's free market quota provided, however, that Cuban exports to the countries in the preceding year have been higher than 910,000 tons (i.e., average ex- ports in the period 1960 to 1967). 16. The first and second of these undertakings place definite limits on re-exports of Cuban sugar by the USSR and the three net exporting coun- tries mentioned. The third provision is weakened by the clause referring to Cuban exports in the preceding year which might not have reached the specified volume. Moreover, no limitations have been stipulated for other centrally planned importers of Cuban sugar which may be actual or poten- tial re-exporters to the free market. These loopholes should be covered, however, by the general obligations of members participating in special arrangements to conduct their sugar trade "i a manner which shall not prejudice the objectives of the Agreement. " Such members also under- take to adopt measures which will ensure that increased trade under special arrangements will not result in increased re-exports to the free market. 17. Provisions relating to stocks are similar to those under previous Agreements. Exporting members' end-of-season stocks should not be in excess of either 20 percent of production in the immediately pre- ceding year, or 20 percent of basic export tonnages (over and above stocks held for domestic consumption requirements). Exporters were given a choice between the two alternatives. Minimum stocks, defined as the quantities of uncommitted sugar held (in addition to those required for domestic consumption and to meet obligations under special arrangements), should not be less than 15 percent (or 10 percent) of basic export ton- nages for developed (or developing) countries respectively. 18. Special obligations by exporters concerning free market supplies to importing members would be activated if prices exceeded 4.75 cents per pound for ',en consecutive days; in that case exporters would have to release sugar from minimum stocks for prompt sale and shipment. Obliga- tions would become increasingly stringent as prices advance; should they reach 6.50 cents per pound exporters would have to supply, if requested, specified quantities to their traditional markets at prices not exceeding an agreed limit. 19. Special obligations by importing members, designed to avoid loss of markets to non-participating exporters, have been strengthened. The (standard) provisions requiring importers to limit purchases from non- members to specified quantities have been supplemented by commitments to refrain altogether from such purchases if and as long as prices were at or below 3.25 cents per pound. Conversely, if prices were at or above 5.25 cents per pound all restrictions would be suspended. 1/ International Sugar Agreement 1968, Article 34 "Special Arrangements" paragraph (4). ANIEX I Page 7 20. In contrast to previous Agreements, which were mainly concerned with the problem of price stabilization, an attempt was made to deal with the increasingly pressing roblem of securing access to markets. However, the commitments by (developed importing members whi finally emerged remained well within the limits of past performance; they imply no promise that future imports would exceed their prospective level in the absence of any pledge. 21. Hembership among net exporting countries is fairly comprehensive. Those which have participated in the negotiationsI/ but are not members account for hardly more than six percent of aggregate basic export ton- nages (see Column 1, Annex Table X-2; quotas of non-members are shown in parentheses). Participation on the side of net importers is much less wide; in mid-March (at the time of the most recent meeting of the Council) the list consisted of : Canada, Finland, Ghana, Ireland, Japan, Kenya, Malawi, New Zealand, Nigeria, Portugal, Sweden, the USSR and the U.K. The United States, a member of earlier Agreements, has not joined; however, since most of U.S. imports move under special arrangements, not covered by the quotas under the International Agreement, non-participation of the U.S. does not seriously affect the operation of the latter. 22. The Agreement has been concluded for a period of five years, from Januar 1, 1969 to December 31, 1973. Before the end of the third year (i.e., during 1971) the 0ouncil, after having reviewed past opera- tions, may propose amendments and, if deemed necessary, make arrangements for re-negotiation of the Agreement. When conducting its review the Council should, by special vote, determine the basic export tonnages for the remaining three years. If no such decision is taken, the tonnages would remain the same as for the preceding three years. 1/ Southern Rhodesia is the only net exporting country which has not participated in the negotiations. LIST OF STATISTICAL TABLES Annex Table M-1: Sugar: Estimates of 1975 consumption, production and import demand in net importing countries com- pared to 1966-68 Annex Table MI-2: Sugar: Estimates of 1975 consumption, production and net imports in the USSR and China (Mainland) compared to 1966-68 Annex Table X-1: Sugar: Estimates of 1975 consumption in net exporting countries compared to 1966-68 Annex Table X-2: Sugar: International Sugar Agreement (ISA) basic export tonnages 1971, U.S. initial import quotas 1970 and Commonwealth negotiated price quotas 1971 Annex Table X-3: Sugar: Tentative estimates of distribution of consumption, export shares and production required among major net exporting countries and areas in 1975 compared to 1966-68 data Annex Table M-1: SUGAR: ESTIMATES OF 1975 CONSUMPTION, PRODUCTION AND IMPORT DEMAND IN HET IMP)RTING COUNTRIES ()MPARED TO 1966-68 Estimaten for 1975 1966-68 Consmptdon Net imports Consumption Net Consumption Population Per caput Total rlow High High Low Popu.ation Per caput Total Production Imports minus prod. (illions) (kg.) -------------- (thousand tons) --------------- (Millions) (kg.) --- (thousand tons) ------------ Developed countries USA MainlandL/ 222.3 50 11,120 6,6h0 6,790 l,180 ,330 198.6 18.8 9,690 5,80 .,210 1,210 Quota exempt 150 150 150 Hawaii!/ .9 50 50 50 50 - - .7 53.3 39 39 - - Puerto Rico (inclu4ing Virgin Islands' )2 130 130 - - 2.8 41.0 113 113 - - 226.2 50 11,150 6,820 6,970 4,630 1,180 202.1 18.7 9,812 5,632 4,210 1,210 Canada 23.6 50 1,180 160 190 1,020 990 20.5 17.5 970 135 823 835 Japan 106.6 32 3,400 750 900 2,650 2,500 100.9 21.6 2,256 580 1,645 1,676 U.K. 58.6 52 3,050 950 1,050 2,100 2,000 55.3 52.0 2,883 950 1,931 1,933 Switzerland 6.6 52 340 60 80 280 26o 6.1 L9.9 303 63 254 240 Finland 5.0 16 230 50 70 180 162 4.7 5.0 210 59 172 151 Norway 4.1 49 200 - - 200 200 3-8 17.6 180 - 181 180 Sweden 8.1 17 380 250 300 130 8o 7.9 15.5 358 260 128 98 SpaIn? 31.1 29 1,000 850 950 150 50 32.1 21.1 798 636 213 162 New Zealand 3.2 53 170 - - 170 170 2.7 52.5 143 - 10 143 Other 1,30 1,090 1,130 250 .170 12.2 27.1 1,10 896 362 2h7 Total Developed 520.9 th 22,7L0 10,980 11,680 11,760 l,060 178.3 39.9 19,086 9,211 12,062 9,875 Developing countries Western Hemisphere Chile 10.9 38.5 120 150 180 270 240 9.0 37.0 333 157 176 176 Other .j 42.3 165 95 105 70 6o 1L? 40.9 l5 66 78 69 1.8 39.5 585 215 285 31o 300 12.3 38.0 168 223 254 245 Africa Algeria 15.5 23 360 10 10 350 350 12.5 19 239 5 271 231 mrocco 18.5 30 550 300 350 250 200 14.1 27 382 58 300 324 Sudan 17.5 15 265 120 180 15 85 1h.4 13.1 188 68 139 120 UAR 10.0 17 68o 150 550 230 130 30.9 16.5 510 379 120 131 Other 226.8 5.4 1,235 635 720 600 51 1L58 1.7 877 221 702 656 318.3 9.7 3,090 1,515 1,810 1,575 i,280 257.7 8.5 2,196 731 1,532 1,165 Asia and Oceania Ceylon 15.0 21.5 370 20 10 350 330 11.8 21.2 250 9 251 241 Iraq 11.1 35 100 30 50 370 350 8.5 31.0 288 4 282 281 Iran 31.5 21 750 650 750 100 - 36.2 23.2 608 123 175 185 Indonesia 133.0 7 930 750 85o 18C 80 110.1 6 671 622 34 49 W. Malaysia 10.0 30 300 50 1CO 250 200 8.6 27.8 238 - 256 238 Pakistan 18.8 6 890 650 800 210 90 118.6 1.8 569 503 85 66 Other 2 11.0 1605 250 3CC 1,355 11305 18.9 9.6 ,162 98 1,167 21,06 495.2 10.6 5,215 2,100 2,890 2,845 2,355 4C2.7 9.4 3,7.86 1,659 2,250 2,127 Total Developing 828.1 10.8 8,920 4,160 1,985 1,760 3,935 672.7 9.6 6,150 2,613 4,036 3,837 Total Developed & Developing 1319.0 23.5 31,660 15,310 16,665 16,520 31,995 1351.0 22.2 25,536 11,821 16,098 13,712 1/ Rounded. 2/ Production: Mainland plus receipts from Hawaii and Puerto Rico. Consumption: Mainland only. Quo-a exempt: sugar for feed, alcohol ad for re-export in sugar-containing producto. Hawaii and Puerto Rico: production for on ucoumption only. 2/ Including Balearic ani Canary Islands. Sources: Population projections: FAO: Agricultural Comnodities - Projections for 1975 asi 1985, Vol. II; CCP 67/3 August 1966. USDA: World Population and Izrome by Countries 1950-65 ard Projections to 1960. Economic Research Service Octoter 1968. 1966-68 data: International Sugar Council: Sugar YearDook 19683 statistical Bulletin, various isue, supplmented by data from USDA: World AZricultural Production and Trade, June and August 1969. F. 0. Licht: International Su6ar Report. July 28, 1969. Annex Table 1-2: SUGAR: EST4TIS OF 1975 C0,STUMPTION, PRODUCTION ALM NET MPORTS IN THE USSR AND CHIA (IIrLAND) COIPARED TO 1966-68 USSR Mainland China 1975 1966-66 1975 196-68 Population, million 256 236 930 720 Consumption per caput, kg. 42-44 40 4.6-5.0 4.2 Total, million metric tons 10.8-11.3 9.4 4.3-4.7 3.0 Production, million metric tons 9.0-10.0 9.3 4.0 2.7 Net imports, million metric tons 1.0 - 2.5 0.75 0.3-0.7 0.2 Sources: USSR Central Statistical Administration, Official Statistical Yearbook of the USSR, various issues; International Sugar Organization, Sugar Yearbook, various issues; Population 1966-68: U.N. Monthly Bulletin of Statistics, various issues. Anex Table K-1: SUGAR: 3TIATE3 OF 1975 CONSUNPTILON II RET EXPORTI.G COUNT1TRIES COREPARED TO 1966-68 1975 1966-68 Consumption Consumption Produc- Consumption Population Per caput Total Population Per caput Total tion as percent of (Millions) (kg.) ('000 tons) (Millions) (kg.) ---('000 tons)--- production Developing Countries Western Hemisphere Cuba 9.3 75 700 8.1 76.0 618 5,473 11 Other W. Hemisphere Dominican Republic 5.1 35 180 3.9 29.8 116 739 16 Mexico 58.0 40 2,300 45.7 36.2 1,657 2,338 71 Central American Common Market 17.4 26 455 13.7 24.5 335 561 60 West Indies and Guyana 4.8 46 220 4.3 42.3 182 1,264 14 Brazil 110.0 42 4,600 85.7 35.4 3,058 4,165 73 Colombia 24.0 26 630 19.2 21.7 417 599 70 Peru 15.3 30 460 12.4 28.0 346 766 45 Venezuela 12.5 35 435 9.h 33.9 317 363 87 Otheri/ 22.3 21 470 18.0 17.9 545 60 Western Hemisphere (excluding Cuba) 295.7 37 10,800 235.4 32.4 7,632 12,240 62 -2- Annex Table X-1 (Continued) 1975 1966-6b Consumption Consumption Produc- Consumption Population Per caput Total Population Per caput Total tion as percent of (Millions) (kg.) ('OOO tons) (Millions) (kg.) ---('000 tons)--- production Developing Countries Africa Mauritius .9 44 40 .8 40.5 32 634 5 Congo (Brazzaville) 1.0 5 5 .9 4.3 4 83 5 Malagasy Republic 8.0 8 65 6.4 6.2 h0 106 38 Swaziland .5 40 20 .4 33.2 13 159 8 Uganda 9.2 14 140 7.9 13.0 103 138 75 Southern Rhodesia 5.8 19 110 4.5 16.5 75 183 41 Sub-total 25.4 15 380 20.9 12.7 267 1,303 20 Asia and Oceania China (Taiwan) 15.7 15 20 13.1 13.2 173 865 20 Philippines 46.0 20 920 34.7 17.1 594 1,564 38 India 610.0 7.5 4,600 512.4 5.3 2,700 2,788 97 Thailand 41.0 8 330 32.7 6.1 200 230 87 Fiji .7 45 30).5 42.9 21 340 6 Sub-total 713.4 9 6,120 593.4 6.2 3,688 5,787 64 Total Developing (excluding Cuba) 1,034.6 17 17,300 849.7 13.6 11,587 19,330 60 - 3 Annex Table K-1 (Continued) 1975 1966-68 Consumption Consuaption Produc- Consumption Population Per caput Total Population Per caput Total tion as percent of (Millions (kg.) ('000 tons) (Millions) (kg.) ---('ooo tons)--- production Developed Countries Australia 13.4 58 780 11.8 .57.0 681 2,545 27 South Africa 24.1 46 1,100 19.3 43.1 808 1,662 49 ExC 194.3 39.5 7,700 186.6 37.0 6,794 7,024 97 Denmark 5.1 54 275 4.9 52.7 259 332 78 Turkey 42.2 20 845 32.7 17.6 576 691 83 Sub-total 279.1 38 10,700 255.3 35.7 9118 12,254 74 Centrally Planned Czechoslovakia 15.3 46 700 14.3 44.5 637 839 76 Hungary 10.5 40 420 10.2 37.2 380 455 84 Poland 36.0 44 1,580 31.9 39.7 1,269 1,805 70 Rumania 20.9 23 480 19.3 20.0 387 460 84 Sub-total 82.7 38 3,180 75.7 35.3 2,673 3,559 75 Total all exporters 1,405.7 22.6 31,900 1,188.8 20.2 24,000 40,620 59 1/ Bolivia, British Honduras, Ecuador, Haiti, Panama and Paraguay. Source: 1966-68 - International Sugar Organization, Sugar Yearbook 1968. Population projections 1975 - see sources Annex Table M-1. Annex Table X-2: SUGAR: INTE-N[ATIONAL SUGAR AGREE2ENT (ISA) BASIC EXPORT TOUNAGES 1971, U.S. INITIAL IMPORT QUOTAS 1970 AND COMONWEALTH NEGOTIATED PRICE QUOTAS 1971 ISA 1971 US initial 1970 quotas UK 1971 Incl.proration Basic export of Cuban and Negotiated tonnagesl_/ Basic S. Rhodesian Price Quotas quotas ('000 metric tons) (1000 short tons) ('000 long tons) Developing Countries W. Hemisphere Cuba 2,150 2/ - - Other W. Hemisphere Argentina 55 28 .58 - Bahamas - 10 10 - Bolivia 10 3 6 - Brazil 500 227 471 - British Honduras 22 7 12 21 Central American Comon Market Costa Rica ) 27 55 - El Salvador ) (33) 17 34 - Nicaragua ) 27 55 - Guatemala 11 23 47 - Honduras 11 3 6 - Colombia 164 24 50 - Dominican Republic 186 227 471 - Ecuador (10) 33 68 - Haiti (10) 13 26 - Mexico 96 232 481 - Panama (10) 17 35 - Paraguay (10) - - - Peru 100 181 375 - Venezuela (17) 11 24 - West Indies & Guyana 200 91 166 725 Sub-total 3,595 1,201 2,450 746 Africa Congo (Brazzaville) 41 - - - Malagasy Republic 41 5 9 - Mauritius 175 10 18 380 S. Rhodesia - 2/ - 25j/ Swaziland 55 -h 7 85 Uganda 39 - - 7 Sub-total 351 19 34 497 Annex Table X-2 (Continued) ISA 1971 US initial 1970 quotas UK 1971 Incl.proration Basic export of Cuban and Negotiated tonnagesl/ Basic S. Rhodesian Price Quotas Quotas ('000 metric tons) ('000 short tons) ('000 long tons) Developing Countries Asia and Oceania China (Taiwan) 630 45 82 - India 250 43 79 25 Philippines - 1,126 1,126 - Thailand 36 10 18 - Fiji 155 24 43 140 Sub-total 1,071 1,248 1,348 165 'otal Developing 5,017 2,453 3,822 1,408 Developed Countries Australia 1,100 108 197 335 Denmark 41 - - - EEC. (300) 29 52 South Africa 625 32 58 Turkey (60) - - - Sub-total 2,126 169 307 335 Centrally Planned Czechoslovakia 270 - - - Hungary 51 - Poland 370 Rumania (46) - Sub-total 737 Total Net Exporters 7,880 2,637 4,139 1,743 Metric ton equivalent 7,880 2,391 3,755 1,771 Non-members of ISA (496) 1/ Basic export tonnages of exporters which participated in the negotiation of the ISA but are not members are shown in parentheses. 2/ Quota temporarily suspended. 3/ EEC includes French Overseas Departments. Source: International Sugar Agreement 1968, Article 40. USDA, Sugar Report, November 1969, "Sugar Requirements for 1970 Proposed" page 28. The Commonwealth Sugar Agreement, Text of 1968, page 13. Annex Table X-3: SUGKIN: TTTATIE sIIMATE3 OY DI3TRIBUTIOM OF CO;3UMPTION, EXPC,T 311H_! AD PRODUCTION RJEUI!TED AMOG MAJOil IT EXPOCDTIIG COU1TRIES AD AREAS 1I 197 COMP2ARED TO 1966-68 DATA (Thousand metric tons) Estimates 1975 1966-68 average Annual average growth rate, Consump- Export Production Consuip- Net Produc- Consump- Net Produc- tion Shares requiredl/ tion Exports tionl/ tion Exports tion Developing Countries Western Hemisphere Cuba_/ 700 2,150 4,6501/ 618 1,530 4,0201/ 1.6 4.3 1.8 (1 800) (1 900) Dominican Republic 180 750 950 116 627 739 5.6 2.3 3.2 West Indies & Guyana 220 1,130 1,370 182 1,089 1,264 2.4 0.5 1.0 Mexico 2,300 640 2,960 1,657 587 2,338 4.2 1.1 3.0 Argentina 1,050 110 1,180 881 84 900 2.2 3.4 3.4 Brazil 4,600 1,030 5,680 3,058 1,029 4,165 5.2 - 4.0 Colombia 630 220 850 417 184 599 5.3 2.3 4.5 Peru 460 520 1,000 346 441 766 3.6 2.1 3.4 Other W. Hemisphere 1,360 580 1,950 975 441 1,469 4.2 3.5 3.6 Sub-total (excluding Cuba) 10,800 4,980 15,940 7,632 4,482 12,240 4.4 1.3 3.4 Africa Mauritius 40 600 640 31 593 634 3.2 3/ 3/ Swaziland 20 150 170 13 144 159 5.5 0.5 0.8 S. Rhodesia 110 90 200 75 65 183 4.9 4.2 1.1 Other Africa 210 260 480 147 173 327 4.6 5.2 4.9 Sub-total 380 1,100 1,490 266 975 1,303 4.6 1.5 1.7 -2- Annex Table X-3 (Continued) Estimates 1975 1966-68 average Annual average growth rate, Consump- Export Production Consump- Net Produn-, Consump- Net Produc- tion Shares required2/ tion Exports tion tion Exports tion Developing Countries Asia and Oceania China (Taiwan) 240 710 950 173 691 865 3.8 3/ 1.2 India ) 4,600 360 4,980 2,700 265 2,788 6.9 4.0 7.5 (India)k/ ) (2,800) (235) (3,210) (6.4) (5.5) (5.6) Philippines 920 1,120 2,040 594 1,036 1,564 5.6 1.0 3.4 Thailand 330 60 390 200 23 230 6.5 12.7 6.8 Fiji 3O 340 370 21 321 340 4.6 0.7 1.1 Sub-total 6,120 2,590 8,730 3,688 2,336 5,787 6.5 1.3 5.3 Total Developing (excluding Cuba) 17,300 8,670 26,160 11,86 7,793 19,330 5.1 1.4 3.9 Develooed Countries Australia 780 1,650 2,430 681 1,848 2,545 1.7 - - South Africa 1,100 680 1,780 808 774 1,662 3.9 - 0.9 EEC 7,700 360 8,060 6,794 240 7,024 1.6 5.2 1.7 Denmark 275 40 315 259 61 332 0.8 - - Turkey 845 60 905 576 48 691 4.9 2.8 3.4 Total Developed 10,700 2,790 13,490 9,118 2,971 12,254 2.0 - 1.2 Centrally Planned / 3,180 740 3,920 2,673 733 3,559 2.2 - 1.2 Unallocated 200 200 Total (Ecluding Cuba) 31,200 12,400 43,800 23,380 11,500 35,140 (Including Cuba) 31,900 16,350 48,45o 24,000 14,930 39,160 Footnotes to Annex Table X-3 1/ Production required in 1975 and actual 1966-68: totals and Cuban figures exclude amounts exported to and retained by centrally planned countries. Production estimates for 1975, total and for some areas, include some allowance for addition to stocks in exporting countries. 2/ Cuba: exports for 1975 equal to basic export tonnages under the International Agreement (2.15 million tons) plus export and re-export entitlements of centrally planned countries importing Cuban sugar (1.8 million tons). Those for 1966-68 are exports to the free market plus re-exports by centrally planned countries importing Cuban sugar. 2/ Rate less than 0.5 percent. 4/ India: production on the 1966-68 average was abnormally low as a result of two consecutive droughts. The figures in brackets refer to the 1965-69 average, which is more suitable as a basis of comparison. 5/ Czechoslovakia, Hungary, Poland and 2umania. Source: 1966-68: International Sugar Organization, Sugar Yearbook, 1968.