José Orive, executive director at London-based International Sugar Organization (ISO), says the cane payment systems across nations present a rainbow of colours and India must pick up a system in which all the key stakeholders win. In an interview to FE, he says global sugar surplus in 2017-18 would be more than anticipated, which means prices could remain subdued. Orive also argues any demonisation of sugar as a ‘sin’ product must be based on scientific evidence, and not hearsay. Edited excerpts:
What is your projection of India’s sugar production in 2017-18?
Our projection is that India’s production will go up from 20.5 million tonne in 2016-17 to 25 million tonne in 2017-18 (marketing year starting October). But these estimates are subject to revisions. We have learnt that because of weather patterns, policy changes etc, to make a finite projection isn’t a wise idea. The ISO is a UN agency and our goal is to provide transparent and objective analysis.
What about production in Brazil?
We are forecasting a higher but much-less-than normal production, over half-a-million tonne more than in 2016-17 — 36.2 million tonne against 35.6 million tonne in 2016-17. Brazil has been fortunate that its central-southern region has been immune to abrupt climate variations.
Is more cane being diverted towards bio-fuel in Brazil?
In Brazil, they can shift to ethanol or sugar according to market conditions. If the ethanol price is good and competitive vis-a-vis gasoline, you will see more cane diverted to ethanol. If policy issues like taxes, incentives etc are granted or taken away, these influence the shift. Lately, we saw when sugar prices rose a bit in the international market and Petrobras implemented a new gasoline pricing system, and the government removed the incentive for ethanol, more cane was diverted towards sugar than ethanol.
In India, we have broadly two sets of benchmark prices of cane—the fair and remunerative price fixed by the central government and the state advised prices set by states—with the latter being higher. Do you think it’s time for India to have one benchmark price?
We monitor cane payment systems throughout the world, and it’s a rainbow of colours. What we emphasize is that any payment system that India adopts should be a win-win situation for farmers, millers and consumers. So India has to find a payment system in which every stakeholder in the sugar chain wins.
Is the linking of the price of cane to the global price of its by-products, mainly sugar, a good idea for India?
In some countries that makes sense. Usually such a model is applicable to countries that have large exports — for example, my country Guatemala, where above 70% of sugar is exported. Many cane growers link their contracts to the world price. But in a country like India, which doesn’t regularly export, it may not make sense.
Will global supplies rise in 2017-18 after a deficit in 2016-17?
We are forecasting a surplus for next year. We are looking at a figure of 4.2 million tonne for 2017-18, compared with the earlier projection of 2.9 million tonne for the year. This, again, is subject to revisions.
With 4.2 million tonne in surplus, will global prices remain subdued in the short-to-medium term (Prices have fallen over a quarter in 2017 to around $378 a tonne)?
Generally, when the market remains in surplus, prices remain subdued. That’s normal. Traders say prices could remain bearish.
India has allowed 8,00,000 tonne of raw sugar imports at zero/concessional duties this year. Does it need to import more in 2017-18 to keep domestic supplies steady?
That’s up to you. The ISO doesn’t tell countries what to do. According to the latest forecasts, and if millers and consumers think India has enough sugar, you don’t need to import.
Sugar is increasingly being projected as a ‘sin’ product that causes many diseases. Some say such a perception may dent sugar consumption in the long run. What’s your view?
At the ISO, we continue to emphasize that any such narrative must be based on scientific evidence. There is overwhelming evidence that at least 44% of our daily energy needs must come from carbohydrates. Life is about choices. What we don’t like is this demonisation of sugar for all the ills in the world by some people who stand to gain from doing so. We think the consumer deserves to know the truth and the truth must be based on scientific evidence. Of course, you need other elements — physical exercise, the consumption of other types of food items etc— in a perfect equation. We believe we the people deserve nothing less so that we can make decisions for ourselves, our families and our kids.