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1、GLOBAL MARKET REPORTSugar cane prices and sustainability SUSTAINABLE COMMODITIES MARKETPLACE SERIESVivek Voora,Steffany Bermdez,Han Le,Cristina Larrea,and Erika LunaSeptember 2023Market OverviewGlobal production and consumption of sugar cane recover after the effects of the COVID-19 pandemic.Sugar c
2、ane is one of the most efficient plants at converting sunlight into energy.It is common in diets around the world and is an important biofuel feedstock(UNICA,n.d.).This ancient agricultural commodity was traded for thousands of years as a product chewed for sweetness.Originally from New Guinea,sugar
3、 cane made its way across the world via trade routes to Southeast Asia,the Pacific islands,and India(Daniels&Daniels,1993).It became a crop of great importance in the 15th century during European colonial expansion(Daniels&Daniels,1993).A perennial crop grown mainly in tropical climates,sugar cane r
4、eaches 2 to 6 metres in height and takes 12 to 18 months to mature.Commercial sugar cane is a hybrid grass species accounting for 86%of global sugar production(Daniels&Daniels,1993).Sugar has become so widespread that it is linked to global health challenges,such as rising obesity(World Cancer Resea
5、rch Fund International,n.d.).Harvested sugar cane stalks are refined into cane sugar by extracting their juice,which is then boiled until crystallization and centrifuged to separate raw sugar,cane,and molasses.Most raw sugar cane is further refined into granulated sugar via filtration,crystallizatio
6、n,and drying for wide use in the food and beverage sector.In addition to sugar,processing sugar cane also yields molasses,a sweet,thick liquid used in food and distilled into alcohol(rum and cachaa)and bagasse,a residue burned to produce heat and steam to generate electricity.Cane juice can also be
7、fermented and distilled into anhydrous ethanol,which is typically blended and used as biofuel feedstock(Dotaniya et al.,2016).About 81%of global sugar cane production is converted into cane sugar,while the rest is converted into biofuel(Organisation for Economic Co-operation and Development OECD&Foo
8、d and Agriculture Organization of the United Nations FAO,2021).The market value of the sugar cane sector exceeded USD 56 billion in 2022(OECD IISD.org/ssi 2Global Market ReportLIVELIHOODSAbout 773,000 people work in the sugar cane sector in Brazil.6 million smallholders grow sugar cane in India.300,
9、000 smallholders support the sugar cane sector in Thailand.&FAO,2021).Despite market disruptions due to the COVID-19 pandemic and Russias invasion of Ukraine,sugar cane production is expected to continue growing to meet rising demand,particularly in developing countries(OECD&FAO,2021).Sugar cane pro
10、cessing must be done quickly to preserve its sucrose.This fact,along with the high costs of transportation to the mill,is why sugar cane mills are located as close as possible to sugar cane fields,which generate considerable economic activity in rural areas.Sugar cane cultivation and processing empl
11、oy more than 100 million people in around 120 sugar-producing countries(South African Sugar Association,2022).The Brazilian sugar cane sector produces 40%of the worlds sugar cane and directly employs 773,000 peopledown from upwards of 1 million jobs since the country transitioned to mechanized harve
12、sting in 2017and represents 25%of the rural workforce(ProTerra Foundation,2020;UNICA,n.d.).The Thai sugar cane sector is supported by 300,000 smallholder sugar cane farmers on plots averaging 2 ha and provides employment for more than 1 million people along the supply chain,as well as seasonal migra
13、nt workers(Bonsucro,2018a;1 This refers to total sugar produced in the world from sugar cane and beet.Sugar cane accounts for 87%of the aggregate output,with sugar beet making up the remainder.OECD&FAO,2021).The Indian sugar cane sector is supported by 6 million smallholders cultivating 1-ha plots a
14、nd provides rural livelihoods for about 50 million people(Bonsucro,2021c).The South African sugar cane sector is supported by more than 20,000 smallholders and provides 85,000 direct and 350,000 indirect jobs(South African Sugar Association,2022).Sugar cane production grew from around 1.71 billion t
15、onnes in 2008 to 1.87 billion tonnes in 2020 from cultivating 26 million ha,according to the FAO(FAOSTAT,2022a).Small production increases in that period in Brazil,India,and Pakistan offset decreases in China(FAOSTAT,2022b).Sugar cane production has slowed over the last decade,as its compound annual
16、 growth rate(CAGR)of 1.23%from 2008 to 2019 dropped to 0.73%from 2014 to 2019.Most sugar cane is processed domestically into cane sugar for local consumption and export.About 40%1 of production is exported,providing an important source of foreign exchange revenue for exporting countries(Canadian Sug
17、ar Institute,2022).Brazil,Thailand,and Australia have been the top exporting countries of raw sugar cane(HS 170111)since 2016,exporting approximately 25 million tonnes(Mt),2.8 Mt,and 2.5 Mt,respectively,in 2020.China and Indonesia have mostly been the largest importers,importing around 5.2 Mt and 4.
18、6 Mt in 2020,respectively,followed by Algeria and the United States,both with 2.4 Mt(ResourceTrade.Earth,2022).IISD.org/ssi 3Sugar Cane Prices and SustainabilitySupply has slowed in many parts of the world due to unpredictable events,such as the COVID-19 pandemic,the war in Ukraine,soaring inflation
19、,and extreme weather conditions,though global supply recovered in the 2021/2022 growing season and is expected to increase moderately going forward due to production rebounds and yield improvements(FAO et al.,2022;Husain,2022;Mera et al.,2021;United Nations Conference on Trade and Development UNCTAD
20、,2022).The global sugar cane supply exceeded demand prior to the pandemic,while in 2020/2021 and 2021/2022 demand was slightly higher than supply(Canadian Sugar Institute,2022;European Commission,2023a;International Sugar Organization,2023).Demand is expected to rise moderately going forward,fuelled
21、 by population growth,increasing urbanization,and growing middle-class and young populations in low-income countries,especially in Asia and Africa(OECD&FAO,2022).However,the OECD and FAO(2022)estimate that supply will outstrip demand in this decade.In 2020,measures to prevent the spread of the COVID
22、-19 virus disrupted the sugar cane supply chain by boosting production costs to meet sanitization requirements,limiting access to needed labour and agricultural inputs and causing logistical and transportation challenges.Lockdowns restricting the movement of people and products caused significant un
23、certainties,resulting in soaring food and fertilizer prices across the world(FAO et al.,2022;Jagtap Figure 1.Global sugar cane production from 2008 to 2019:Sugar cane that complies with voluntary sustainability standards(VSSs)reached 7%to 8%of total production Note:Conventional production volumes do
24、 not comply with a VSS,while VSS-compliant production volumes refer to sugar cane produced in compliance with at least one VSS.Production volumes that are defined as potentially VSS compliant cannot be definitively identified as conventional or VSS compliant with the data currently available.Source:
25、FAO,2022a;Meier et al.,2021.VSS compliantPotentiallyVSS compliantConventional20192015201620172018201420132012201120102009200805001,0002,0001,500MtIISD.org/ssi 4Global Market Reportet al.,2022;OECD,2022;Ustinova,2022;World Trade Organization WTO,2022).Non-essential foods made with cane sugar(i.e.,bev
26、erages,desserts,and pastries)were particularly affected,and their demand declined(OECD&FAO,2021;World Cancer Research Fund International,n.d.).Demand for ethanol-based biofuels also declined as governments urged citizens to stay home and off the roads.While global sugar consumption slightly dropped
27、as a result of the pandemic,the OECD and FAO reported that demand rebounded during two consecutive seasons(from October 2020 to September 2021 and from October 2021 to September 2022)as national lockdowns were lifted,restaurants reopened,supply chain bottlenecks were removed,and economies recovered(
28、OECD&FAO,2021,2022).Global sugar cane production also declined in the 2019/2020 and 2020/2021 seasons because of the effects of the pandemic,but it rebounded in 2021/2022 and 2022/2023,mainly due to increased production in India and Thailand(European Commission,2023a;OECD&FAO,2022).Other factors hav
29、e influenced the supply and demand of cane sugar post-pandemic.India and Thailand are among several producing countries that continue to regulate domestic cane sugar prices and intervene to address food security and market disruptions that can influence supply and demand dynamics.For example,India l
30、imited its cane sugar exports to maintain domestic supplies in March 2022(Jadhav&Bhardwaj,2022).Sanctions and trade restrictions due to the UkraineRussia conflict have limited fertilizer exports from Russia and Belarus,major global producers of nitrogen,a key nutrient for sugar cane production.This
31、action resulted in soaring fertilizer prices and shortages and caused turmoil and uncertainty in global food and fertilizer markets(FAO et al.,2022;Haddad,2022).All this may lead to a decrease in global supply in the 2023/2024 growing season as producers are facing higher costs of production and may
32、 reduce the use of synthetic fertilizers,which can drop their yields(European Commission,2023a.).The International Fertilizer Association notes that it is rare for the fertilizer supply chain to face multiple disruptions in such a short period(Cross,2022).Fertilizer prices have climbed 230%since May
33、 2020(Acciarino,2022;Hebebrand&Laborde,2022,a,2022b).Soaring production costs have had a huge impact on Brazilwhich imports 85%of its fertilizer,a quarter of which comes from Russia(Nti,2022).The high cost of imported fertilizers has driven farmers in countries like Brazil,India,and South Africa to
34、look for greener alternatives.Although this transition can take time and effort,many sugar cane farmers have already switched to organic fertilizers,experimenting with organic fertilization.This,in turn,can reduce their dependency on imported synthetic fertilizers and lower their production costs an
35、d energy use while improving soil health.In India,farmers who have switched to organic farming are experiencing improved soil nutrient levels and sugar cane quality(Jain,2022).Some farmers in Brazil,South Africa,and Thailand have also combined sugar cane cultivation with livestock rearing or obtaine
36、d animal manure from neighbouring farms to replace chemical fertilizers and enrich their soils(Teixeira et al.,2022).IISD.org/ssi 5Sugar Cane Prices and SustainabilityClimate change continues to threaten the viability of the sugar cane sector.Besides adjusting to the challenges brought on by COVID-1
37、9 and the invasion of Ukraine,the sugar cane sector will have to continue adapting to the impacts of climate change.Indeed,erratic climatic conditions are predicted to shift the suitability of sugar cane production around the world due to changing precipitation patterns,extreme weather events(e.g.,d
38、rought,floods,frost,typhoons),and pests and diseases.These changes will especially affect developing countries,where adaptation capacities are low and vulnerabilities to extreme weather events are high.Nevertheless,this impact will vary considerably depending on geographic location,crop variety,and
39、adaptation strategies adopted.Sugar cane yields in Thailand are expected to decline by 24%to 33%between 2046 and 2055,reducing its contribution to the global sugar supply by 3%to 4%(Pipitpukdee et al.,2020).Rising temperatures and changes in precipitation patterns will affect the Chinese sugar cane
40、sector,as 80%of its sugar cane is rainfed.Furthermore,sea level rise will affect coastal sugar cane production areas in Australia(UN Comtrade,2022),Florida,and Fiji(Linnenlueke et al.,2020).Records indicating how a changing climate has impacted sugar cane production in the past show that drought acc
41、ounted for an 18%drop in production in 2004,and frost led to a 34%drop in yield in Guangxi,China(Zhao,2021).Sugar cane rusts have spread quickly throughout the world,causing a 40%production loss equivalent to USD 150 million in the Australian sugar cane sector in 2000,15%30%production loss in the Br
42、azilian State of So Paulo in 2009,and 40%crop loss equivalent to USD 63 million in Florida in 2013(Selvakumar&Viswanathan,2019;Zhao,2021).Nevertheless,climate change may create favourable temperature conditions for some areas,such as the Brazilian state of So Paulo,which could see yield increases of
43、 15%59%by 2050(Marin et al.,2013).Sugar cane farmers will need to adapt to more unpredictable and extreme weather events.Enabling climate resilience among smallholder farmers is particularly important,as their livelihoods have already been harmed by the pandemic and current critical global economic
44、uncertainty in interconnected food,fuel,and fertilizer markets(FAO et al.,2022;OECD,2022;UNCTAD,2022).Adaptation strategies focus on developing climate-resilient high-yielding cultivars,adopting climate-smart farming practices,and using irrigation and drainage systems.Brazilian farmers will nearly d
45、ouble the area planted with genetically modified sugar cane that is resistant to drought and stem-boring insects;borers cause the loss of more than USD 1 billion annually to Brazilian cane growers through lost productivity,lower quality,and insecticide costs(Samora,2022).Adaptation strategies in Ind
46、ia,northeastern Brazil,South Africa,southern Thailand,and Zimbabwe have focused on developing drought-tolerant,disease-resistant,high-yielding varieties and improving irrigation systems(Flack-Prain et al.,2021;Linnenlueke et al.,2020).Nevertheless,irrigation systems must be sustainably developed to
47、prevent depleting available IISD.org/ssi 6Global Market Reportwater resources,as sugar cane is a thirsty crop(Linnenlueke et al.,2020).Using climate-smart farming practices has to be supported by better decision-making tools,such as improved weather forecasting and soil moisture and fertilizer manag
48、ement(Linnenlueke et al.,2020).Government interventions include improving national adaptation strategies,shifting sugar cane-growing areas,and promoting economic diversification in rural areas(Linnenlueke et al.,2020).Climate change mitigation opportunities exist all along the sugar cane supply chai
49、n.At the farm level,greenhouse gas(GHG)emissions are greatly reduced with the shift away from pre-harvest sugar cane field burningwhich facilitates harvesting by macheteto more sustainable harvest and mechanized practices.Brazils largest sugar cane-producing state,So Paulo,mandated the gradual elimi
50、nation of pre-harvest burning by 2017(Sussman,2021).Producers can also cut GHG emissions at the farm level by replacing synthetic fertilizers with organic fertilizers and by using renewable forms of energy.For instance,sugar cane plantations in South Africa and Eswatini have shifted from using coal
51、to renewable energy to irrigate their crop(Pryor et al.,2016;United Nations Enviroment al Program,2016).At the other end of the supply chain,the role of sugar cane as a key feedstock to produce biofuels has allowed consumers to move away from fossil fuels.Nevertheless,sugar cane-based biofuels need
52、to minimize their carbon footprint and food security impacts.Here,life-cycle analysis can provide a more comprehensive understanding to compare other sources of energy,such as other biofuels,hydrogen,and renewables.For instance,Brazils National Biofuels Policy(RenovaBio),launched in 2017,has been ke
53、y to reducing GHG emissions to help meet the countrys nationally determined contributions under the Paris Agreement(Ministrio de Minas e Energia,2021).Producing VSS-compliant sugar cane can help build resilience and tackle climate change.Moving the sugar cane sector toward sustainability and climate
54、 resilience is imperative for it to overcome its formidable challenges,such as labour rights infringements,deforestation,biodiversity loss,water depletion,land degradation,and climate change.Adopting VSSs,which began in the sector more than 10 years ago,represents one effort among others to do so.Fo
55、r instance,Bonsucro,ProTerra Foundation,and Organic require the sustainable management of water sources via more efficient water extraction and irrigation methods.Such practices can help preserve water sources for sugar cane cultivation and neighbouring communities,which is particularly valuable dur
56、ing times of drought.These VSSs also require the preservation of forests and High Conservation Value Areas,which can help prevent the loss of valuable natural environments,such as the Amazon,due to the expansion of sugar cane cultivation(Voora et al.,2022).Adopting VSSs allows farmers to differentia
57、te themselves in the marketplace from conventional cane sugar farmers(Voora et al.,2020).In exchange for using more sustainable farming practices,farmers can label their IISD.org/ssi 7Sugar Cane Prices and Sustainabilityproducts as VSS compliant or produced in accordance with a VSS.In 2019,more than
58、 37,000 farmers produced 136 Mt153 Mt of VSS-compliant sugar cane with a farm gate value of at least USD 4 billion to USD 7 billion;that was down 19 Mt22 Mt from the previous year(Meier et al.,2021).The most prominent VSSs in the sugar cane sector included in the dataset ordered by 2019 production v
59、olumes are Bonsucro(86.18 Mt),ProTerra(62.33 Mt),and Organic(4.13 Mt).Fairtrade is also an important VSS in the sugar cane sector,applying to a little more than half a million tonnes of cane sugar produced in 2019.Growing at a CAGR of 46%47%between 2008 and 2019,VSS-compliant sugar cane now represen
60、ts 7%8%of total global production(Meier et al.,2021).Despite this impressive growth,VSS-compliant sugar cane production may be slowing,as its CAGR dropped to 21%24%from 2014 to 2019.Almost all the loss in VSS-compliant production is attributed to a drop in ProTerra-certified sugar cane volumes,which
61、 declined from 93 Mt in 2018 to 62 Mt in 2019.The International Sustainability and Carbon Certification(ISCC)also operates in the sugar cane sector and reported 89,745 ha of certified sugar cane in 2021(ISCC,2022).Another challenge sugar cane producers face is the availability of VSS-compliant cane
62、sugar sold as conventional sugar cane.For instance,only 23%of the total Bonsucro-certified cane sugar was sold as such in 2018(Seixas et al.,2019).Nevertheless,this figure is increasing.Bonsucro sales of certified cane sugar rose to 29%of total production by 2020,in large part due to a credit tradin
63、g system applied by the VSS that year(Bonsucro,2020a;Viart et al.,2021).In some cases,sugar cane farmers who cannot sell their product as VSS compliant may not receive higher prices or premiums to pay for maintaining their certification.Furthermore,falling incomes and higher production costs as of 2
64、020 due How much sugar cane is compliant with a VSS?Figure 2.VSS-compliant sugar cane production volumes in 2019 Source:Meier et al.,2021.Bonsucro 86.18 MtProTerra Foundation 62.33 Mt Organic 4.13 Mt MARKET VALUEMore than 37,000 farmers produced between 136 Mt and 153 Mt of VSS-compliant sugar cane
65、with a market value of at least USD 4 billion.CAGRConventional production grew at a CAGR of 0.50%from 2008 to 2019 but decreased at-0.32%from 2014 to 2019.VSS-compliant production grew at about 46%from 2008 to 2019 and at 21%24%from 2014 to 2019.IISD.org/ssi 8Global Market ReportSugar cane-growing r
66、egions of the world Figure 3.Distribution of sugar cane production in the top 15 producing countries in 2019 Note:Countries with lower Climate Risk Index scores have been most impacted by extreme weather events in the reference period.Sources:Eckstein et al.,2021;FAO,2022a;Meier et al.,2021;Voora et
67、 al.,2020.BrazilCubaSouth AfricaIndonesiaPhilippinesIndiaPakistanThailandChinaGuatemalaColombiaArgentinaMexicoUnited StatesAustraliaVSS compliantPotentially VSS compliantConventionalMtGuatemalaCubaSouth AfricaAustraliaIndonesiaThailandArgentinaUnited StatesPhilippinesColombiaMexicoChinaPakistanIndia
68、Brazil03002001004005006007008001101120215051100100Harvest areaPrevalent VSS-compliant areaClimate Risk Index score for 20002019IISD.org/ssi 9Sugar Cane Prices and Sustainabilityto COVID-19 supply chain disruptions,along with global economic uncertainty because of geopolitical and trade tensions as o
69、f 2021(OECD&FAO,2022),may diminish the capacity of farmers to invest in sustainable production and climate resilience.According to our analysis among sugar cane-producing countries,Brazil,China,India,Pakistan,and Thailand offer VSSs the greatest potential to expand based on the size of their convent
70、ional sugar cane production.Among the least developed sugar cane-producing countries,Sudan,Mozambique,the Democratic Republic of the Congo,Ethiopia,and Haiti offer VSSs the most opportunities to enable the adoption of more sustainable sugar cane farming practices based on their share of global sugar
71、 cane production,the limited presence of VSSs,and their Human Development Index ratings(FAO,2022a;Meier et al.,2021).To make the most of this potential,sugar cane producers may need help from supporting actors to transition to VSS-compliant practices,such as extension services,better market relation
72、s,and increased demand for more sustainable cane sugar(Elder et al.,2021).As importantly,VSS-compliant sugar cane can affect yields.According to our analysis,in 2019,VSS-compliant sugar cane yields were higher in fivepotentially even in threeand lower in 23 sugar cane-producing countries(FAO,2022a;M
73、eier et al.,2021).This outcome may be due to the prevalence of the Organic standard in sugar cane-producing countries,as it tends to have lower yields compared to conventional production systems(Seufert,2019).Eleven sugar cane-producing countries implemented the Organic standard in 2019(Meier et al.
74、,2021).Demand for VSS-compliant sugar cane has recently grown,driven by the biofuel sector industry.Higher retail prices and limited market access are the biggest challenges facing VSS-compliant sugar cane expansion(Husain,2022;UNCTAD,2022).Furthermore,cane sugar is often a hidden ingredient that is
75、 used in food processing or industrial applications,which makes its traceability challenging(Ustinova,2022).In recent years,many countries,including Mexico,South Africa,and the United Kingdom,adopted taxation policies to lower the consumption rates of sugar-sweetened beverages,promote healthy diets,
76、and encourage companies to reformulate their products to reduce sugar content;this has reduced demand for and consumption of cane sugar(World Health Organization,2022).Despite these challenges,demand for VSS-compliant sugar cane has steadily increased,driven by demand for it as a feedstock in the pr
77、oduction of biofuels.VSSs such as the ISCC and Bonsucro have been certifying more sugar mills producing bioethanol in countries like Argentina,Brazil,India,and Thailand(Bonsucro,2018a;ProTerra Foundation,2020;South African Sugar Association,2022).The market uptake of Bonsucro-certified ethanol grew
78、by 68%in 2018(Bonsucro,2018b;South African Sugar Association,2022).This is due,in large part,to European regulations that recognize VSS-compliant sugar cane as an acceptable feedstock for the production of sustainable biofuels(Bonsucro,2021c).Sugar cane-producing countries in Latin America have IISD
79、.org/ssi 10Global Market Reportalso benefited from the growing demand for organic cane sugar.In 2020,European imports of organic sugar rose 29%compared to 2018(UNICA,n.d.).Brazil,one of the worlds largest sugar consumers(123 kg per capita)(FAOSTAT,2022a),plays a critical role in the global market as
80、 both a producer and consumer.VSSs have expanded in the Brazilian sugar cane sector thanks to support from the government,cross-sectoral collaboration,and increasing consumer awareness.However,there is still potential to increase VSS-compliant cane sugar consumption locally.Brazils organic market(va
81、lued at USD 81 million in 2021)only represents 0.1%of global organic market value,which is dominated by the United States and Europe(Statista,2023).In 2019,58%of Brazilian consumers said they buy more products that have a positive impact than they did 5 years earlier,and 82%of Brazilians aged 18 to
82、34 were familiar with“responsible consumerism”(Izquierdo,2019).In other countries,such as South Africa,cane sugar is mostly consumed as an ingredient in beverages and confectionary products and for direct human consumption(40%and 60%of domestic sugar sales,respectively)(International Sugar Organizat
83、ion,2023).While the South African government adopted the Sugar Value Chain Master Plan 2030 in 2020 to ensure the long-term sustainability and profitability of the sector,the plan had very little input from sustainability experts or VSS bodies(personal communication,Bonsucro representative,March 202
84、1;United States Department of Agriculture USDA,2023).Nevertheless,multinationals in South Africa increasingly demand sustainable sugar,and interest in certification is growing(personal communication,Bonsucro representative,March 2021).For example,in 2010,Unilever committed to sourcing 100%of its sug
85、ar cane from more sustainable sources(FAO et al.,2022),and ILLOVO,one of the biggest sugar cane producers and traders in Africa,has started implementing the SUSFARMS Sustainability Tool by the South African Sugarcane Research Institute,an initiative that assists farmers and millers to implement bett
86、er management practices in line with relevant legislation and with the purpose of aligning it with Bonsucro(Dardagan,2018;Global Environmetn Facility&United Nations Development Programme,2019;Illovo Sugar Agrica,2023).As illustrated in Figure 4,the six largest cane sugar-consuming companies bought 1
87、6.2 Mt of cane sugar in 2020.About 5.5 Mt,or 33.7%,of that cane sugar was more sustainably sourced or complied with a VSS or corporate sustainability initiative.Corporate sustainability initiatives refer to sustainable sugar cane-production programs established by private companies rather than by in
88、dependent third parties.For instance,Kelloggs has set up a continuous improvement program on social and environmental practices,and Nestl has created a Responsible Sourcing Standard.All but one of these six companies have sustainability sourcing commitments in place for 2020 and beyond.PepsiCo is th
89、e only company that reports meeting its target of sourcing 100%of its cane sugar from VSS-compliant sources(Bonsucro),mainly in the form of credits(PepsiCo,2021).Three of five companies missed their target to source 100%sustainable cane sugar by 2020(Voora et al.,2020).Kelloggs came the closest,sour
90、cing 74%of its cane sugar from VSS-certified IISD.org/ssi 11Sugar Cane Prices and SustainabilityProgress on sustainable sourcing commitmentsFigure 4.Major sugar cane-consuming companies,their sustainable sourcing commitments,and progress in 2020*No sustainable consumption and sourcing commitments we
91、re found.Sources:Associated British Foods,n.d.;EPA Monitoring,2017;Kelloggs,2019,2021;Nestl,2019,2020,2021a,2021b;PepsiCo,2021;personal communication,S.Alastair,August 26,2021;Swire Coca-Cola,n.d.;The Coca Cola Company,2020;Unilever,2022.Sustainable consumption Conventional consumption Sustainable s
92、ourcing commitmentUnileverPepsiCo IncNestlKelloggsCoca-ColaAssociated British FoodsTonnes02,500,000500,0007,500,0005,000,0006,440,524*2,423,5402,008,000112,065250,833100%sustainable sourcing by 2020100%sustainable sourcing by 2030100%sustainable sourcing by 2020100%sustainable sourcing by 2030100%su
93、stainable sourcing by 2025producers and/or its continuous improvement program in 2020.Unilever and Coca-Cola came in at 31%.Kelloggs has revised its target year to 2030(Kelloggs,n.d.).Figure 4 shows that Coca-Cola has also revised its target to source 100%sustainable cane sugar by 2025.Nestl achieve
94、d its target to source 65%of its cane sugar from more sustainable sources by 2020(Voora et al.,2020),and the Swiss company set a more ambitious goal to source 100%by 2030.Based on the sourcing commitments of some of the largest cane sugar-consuming companies examined and assessing them against curre
95、nt cane sugar-sourcing information,an additional 4.3 Mt of sustainable cane sugar could be sourced by 2025.VSSs in the sugar cane sector initially focused on niche markets.With the establishment of Bonsucro and the involvement of the ProTerra Foundation,however,VSSs started to gain more traction in
96、the sector.Although demand is expected to grow steadily until 2030(OECD&FAO,2021),forecasting VSS-compliant production is challenging because growth accelerated as Bonsucro expanded and the ProTerra Foundation started operating in the sector.In a more pessimistic outlook that weighs the slowdown in
97、the growth of VSS-compliant production trend more heavily in the short term,VSS-IISD.org/ssi 12Global Market Reportcompliant production would increase to about 155 Mt by 2025.A more optimistic outlook weighs the increasing long-term VSS-compliant production trend more heavily and projects a steady r
98、ise to more than 323 Mt by 2025.Although a few potential futures exist between these outlooks,we predict that VSS-compliant production could reach 240 Mt by 2 This includes beet and cane sugar.2025 as demand for sustainable cane sugar continues to grow,motivating sustainable cane sugar sourcing comm
99、itments and enabling VSS-compliant sugar cane farmers to enjoy more success selling their harvest as a VSS-compliant product.Consequently,we expect VSS-compliant sugar cane production to range from 154.68 Mt to 323.05 Mt by 2025.A Dive Into Sugar Cane PricesA complex and fragmented market creates pr
100、ice volatility in the sugar sector.Pricing is important,as it can determine if sugar cane producers stand to gain financially from complying with a VSS.Efforts to shift the sector toward sustainabilitysuch as by abiding by VSSsare partly driven by a need to internalize the external,tangible costs as
101、sociated with the industry,which are not factored into the price paid by end consumers.For example,converting sugar cane into a tonne of cane sugar emits 241 kg of carbon dioxide for the average sugar cane mill in Brazil,and an estimated 213 gallons of water is used for every pound of cane sugar pro
102、duced(Sahai,2022).Also,the external cost of conventional cane sugar produced in Mauritius in 2017 was found to be EUR 2.06 per kg versus EUR 1.96 per kg for Organic-certified cane sugar,with fewer detrimental socio-ecological impacts(True Price,2017).Internalizing the external costs associated with
103、the production and processing of conventional sugar cane in the market price would make VSS-compliant sugar cane more competitive.Therefore,examining how global sugar prices,including sugar cane,intersect with the sectors sustainability is paramount.As with many other agricultural commodity markets,
104、the international prices of cane sugar are largely correlated with macroeconomic dynamics and shifts in supply and demand.Raw or unrefined cane sugar is traded in the futures markets.Most of the worlds sugar2 trade is through the International Exchange Contract in New York(for raw sugar)and London(f
105、or white or refined sugar),which act as the dominant points of reference for pricing and market activity(International Exchange,2023).Governments in main producing and exporting countries also have a large bearing on pricing due to the strict policies and subsidies that influence the price of cane s
106、ugar traded in their jurisdictions.Indeed,the international raw sugar price bears little resemblance to the prices used in domestic markets for most countries.A IISD.org/ssi 13Sugar Cane Prices and Sustainabilitylarge percentage of international cane sugar trade is carried out through governmental a
107、rrangements and long-term contracts that set the price.For liberalized free-traded cane sugar,however,the futures markets still act as the reference price.The sugar cane market has been affected by highly variable price fluctuations in the last decade,mainly due to changes in production volumes in k
108、ey countries such as Brazil,Thailand,and India.In the 2010/2011 season,for instance,cane sugar prices in the international markets reached an all-time high due to supply shortfalls tied to high production costs and the use of sugar cane to produce more ethanol in Brazil.Cane sugar prices then droppe
109、d due to a surplus in supply and less global demand(Voora et al.,2020).More recently,in 2020/2021,the sugar cane harvest dropped in Thailand due to widespread droughts,leading to low global cane sugar stocks and,consequently,high raw cane sugar futures prices(Gro Intelligence,2021).The situation sta
110、bilized in 2022,however,as good rainfall led to a rebound in Thai sugar cane production and exports(Aisyah,2023).According to the OECD and FAOs Agricultural Outlook 20222031(2022),international sugar prices,including cane and beet sugar,are likely to fall over the next 10 years due to improved produ
111、ction prospects and anticipated oversupply.However,price volatility may result from new and revised domestic policies in a few cane sugar exporters,such as changes in volumes destined for ethanol production and price-setting policies(OECD&FAO,2022).As the worlds largest sugar cane producer,Brazil pl
112、ays an important role in shaping prices in the physical and financial markets.International prices can be influenced by economic and political conditions that affect the countrys ability to produce and export cane sugar,such as ethanol use and exchange rate fluctuations that also affect local produc
113、tion costs.When the U.S.dollar is strong against the Brazilian real,Brazilian sugar cane producers costs are relatively lower,making production more profitable and exports more competitive in the global market(McConnell et al.,2010).This,in turn,can create a global oversupply,leading to a drop in pr
114、ices.In addition,the country has developed an industry that easily switches between producing cane sugar for exports and producing ethanol for domestic use.As 60%of the worlds ethanol production uses sugar cane crop as the primary feedstock,any changes in the allocation of Brazilian sugar cane to et
115、hanol production is a key element in determining prices at the global level(Morris et al.,2017;OECD&FAO,2022;Salassi,2007).India,another key producer and importer,has started to promote a national ethanol blending program that would eventually make sugar cane less available for sugar production and
116、reduce global stocks(OECD&FAO,2022),putting pressure on international prices.The ongoing RussiaUkraine war and weather-related challenges have caused major disruptions in the sugar cane market and international prices(Lamba,2022).Energy(petroleum and gas)and fertilizer prices have climbed because of
117、 the war,affecting sugar cane growers through increased input costs,leading to lower fertilizer usage(Ponnarong,2023).The conflict has also affected the supply-and-demand dynamics for cane sugar as other crops become more favourable to growers.For instance,in Brazil,the state-owned petroleum company
118、 Petrobras reacted IISD.org/ssi 14Global Market Reportto the changes in crude oil prices by raising its gasoline price in 2022,which provided an incentive for millers to divert more cane to ethanol production and less to sugar,therefore affecting global cane sugar supply(Millard,2022).International
119、sugar markets(cane and beet)will remain dependent in the medium term on the developments in Russias invasion of Ukraine,weather-related production shortfalls in major producing countries due to climate change,and crude oil price volatility(OECD&FAO,2022).These factors remain a major source of uncert
120、ainty for the sugar cane sector,especially sugar cane growers who depend on the crop for a living.Volatility and rising production costs can threaten sugar cane growers incomes and inhibit entrepreneurial activity.Although cane sugar is considered one of the most valuable agricultural commodities in
121、 the world,many sugar cane growers grapple with the effects of wild price swings in the international market,as well as competition from other sugar sources,such as sugar beet crops,which are mainly produced in Europe and North America(Bonsucro,2021d;FAOSTAT,2023).The price of sugar cane delivered a
122、t the mill is often below production costs for many farmers in developing countries,who also must deal with crop losses due to uncertain weather patterns,high input prices,and rising debt(Bonsucro,2021d;FAO,n.d.;Rajesh,2021).All of this threatens the economic viability of the sector and causes some
123、sugar cane smallholder farmers to live in poverty(Jenkins et al.,2015;Thibane et al.,2023).Sadly,suicides have been reported in the last decade among sugar cane growers in countries,including India,where farmers are not paid enough to cover the costs of production and are forced into debt with payme
124、nts always in arrears(Chiala&Xavier,2017).Low and volatile cane sugar prices also discourage entrepreneurial activity and make it difficult for farmers to manage household expenses and budgets for farm inputs,such as fertilizers and pesticides,or invest in agricultural improvements(Fairtrade Foundat
125、ion,2013;Thibane et al.,2023).In Thailand in the 2019/20 season,for instance,severe droughts caused a drop in sugar cane production,with farmers losing almost their entire crop.The following year,farmers had to pay double the costs for harvesting due to increased labour expenses,causing many of them
126、 to stop planting sugar cane as they could not break even(Rajesh,2021).However,it is important to note that the effects of external shocks on farmers prices and incomes vary greatly by country,as cane sugar pricing at the domestic level is subject to strict regulations and a series of support system
127、s that make domestic prices generally higher and decorrelated from world market quotes(Mpapalika,2019).Farm gate prices for sugar cane growers are influenced by different factors,including mill capacity utilization,production costs,the quality and quantity of cane delivered,and the level of sweetnes
128、s in the canealso known as sucrose contentas well as the implementation of government policies,such as minimum prices and subsidies(Jenkins et al.,2015;Kindred,2023).Sugar cane IISD.org/ssi 15Sugar Cane Prices and Sustainabilitygrowers produce,harvest,and deliver cane sugar to the closest local mill
129、preferably within 24 to 48 hours of harvestingbefore the sucrose content deteriorates,and are usually paid a return on their cane based on a weighted average from a pool of growers that supplied the sugar mill.The price growers receive is then based on the average returns of the mill,whether the can
130、e sugar goes for export or to the domestic market.Most of the cane sugar produced in developing countries is for home consumptionthat is,to satisfy the local marketand only a small proportion is exported(Kindred,2023;Mpapalika,2019).The differences in prices received by farmers are mainly due to the
131、 level of government intervention in the domestic cane sugar industry.On average,producers in Brazil,India,and Thailand receive about 8%of the price of raw cane sugar negotiated in export markets(Zancaner,2022).In Thailand,farmers got around USD 29/tonne in the 2021/22 crop season(Apisitniran,2022;M
132、akgopa&Woody,2022).In India,they received about USD 35/tonne in 2021/22,or about 9%of the raw cane sugar price(Government of India,2023),as per the producer price policies in both countries.In Brazil,producers received around USD 31.40/tonne in the 2021/22 crop season,which represented an increase o
133、f 55%compared to the previous season due to the higher prices of cane sugar and ethanol in local and international markets(Nogueira,2023).In Brazil,about 70,000 independent farmers supply around 40%of the cane processed by Brazilian sugar cane mills(VS Engineering,2016).Cane prices received by farme
134、rs and mills are not set by the government but are based on a model called“Consecana,”a formula that considers the prices for cane sugar and ethanol sold by processors in both the domestic and international markets to establish the“total recoverable sugar”value(or ATR in Portuguese),which represents
135、 the sucrose level of the sugar.This value is released monthly,and mills use it to determine the prices they pay cane suppliers(Akamine,2021;Makgopa&Woody,2022).The industry also pays more for sugar cane with higher sucrose content.This calculation is based on the ATR value,which corresponds to the
136、amount of cane sugar available in the raw material minus the losses in the manufacturing process.In India,the central government fixes a fair and remunerative price for sugar cane each year,indicating the minimum price at which mills should buy sugar cane from farmers.For the 2022/23 season,this pri
137、ce has been fixed at about USD 3.70 per quintal,or USD 36.90 per tonne(PIB Delhi,2022).Some states also announce a state-advised price at higher levels than the fair and remunerative price to encourage more farmers to cultivate the crop.However,sugar cane production in India is extremely variable du
138、e to erratic weather patterns.Providing minimum fixed prices has not managed to increase smallholder farmers incomes,as they still must cope with high production costs,including seedlings,labour,and fertilizer,as well as harvesting and transport costs.This has also led to a mismatch between the pric
139、e the mills should pay farmers and the lower price mills receive from the market,making the sector uncompetitive in the international markets(Deloitte,2021).In Thailand,the Cane and Sugar Act(1984)allows the government to intervene in issues IISD.org/ssi 16Global Market Reportsuch as planted area,fa
140、rm,and mill price-setting and provide monetary incentives,such as direct payments and input subsidies,to encourage millers to increase their capacities and exports(Meriot,2015).The price of sugar cane is predetermined annually by the government and announced in October/November,which marks the begin
141、ning of the season.The price is calculated based on the estimated revenues from domestic and export cane sugar sales for that year and is used by cane sugar millers as a basis to calculate the initial price paid to sugar cane growers(Manivong&Bourgois,2017).The farmer receives an upfront or advance
142、payment on delivery of the sugar cane to the mill based on this official price.At the end of the sugar production cycle,usually in September,the government re-evaluates the revenue from the sale of cane sugar and announces the final sugar cane price.If the upfront payment exceeded what was due throu
143、gh the final calculations at the end of the year,then the difference is deducted the following season(Athipanyakul et al.,2020;Manivong&Bourgois,2017).Production costs also vary from one country to another.In Brazil and Thailand,the cost of cane per tonne(which accounts for 70%to 75%of the cost of c
144、ane sugar)stood at USD 25.11 and USD 27.50,respectively,while in India,it stood at USD 42.30 for the 2017/18 season(Deloitte,2021).These costs were higher than the official farm gate prices announced by these countries in the same season(FAOSTAT,2022b).3 Farm performance is also tied to the size of
145、the farm,quality of seeds,yields,and the distance from farm to mill.In countries like 3 The official producer prices for the 2017/18 season were of USD 19/tonne,USD 33/tonne and USD 23.6/tonne for Brazil,India,and Thailand,respectively(FAOSTAT,2022b).Pakistan and the Philippines,farms of 5 or fewer
146、ha represent a significant proportion of producers,while most farms in Brazil range from 20 ha to 500 ha.This makes a big difference in productivity and costs associated with cane cultivation(Ceres,2017).In India,for instance,about 25%of the cost of sugar cane cultivation stems from harvest and tran
147、sportation(Agri Farming,2019).The situation is similar in Thailand,where low technology leads to low yields,pushing down farmers incomes(Morris et al.,2017;Rajesh,2021).Smallholder farmers in Thailand usually burn the sugar cane crop residues to clear fields for future planting and do not have acces
148、s to harvest machines,limiting productivity and adding to the issue of air pollution(Rajesh,2021).In other sugar cane-producing countries where the government does not regulate the industry,growers receive a small fraction of the international price for raw sugar,making it difficult for them to comp
149、ete with those in countries with strong government support.In countries such as Tanzania,the domestic cane sugar sector has major shortfalls associated with low production and poor storage infrastructure,worsened by the importation of cheap sugar that discourages local production(Mpapalika,2019).In
150、Mozambique,commercial farmers face high irrigation costs because they rely on expensive diesel generators for power supply and transportation costs from farm gate to end markets that are significantly higher than in other producing countries such as Brazil(De Albuquerque&Hobbs,2016).In low-income su
151、gar cane-producing countries,farmers also IISD.org/ssi 17Sugar Cane Prices and Sustainabilitylack adequate agricultural inputs,such as fertilizer and farm equipment leasing,and they are unable to obtain finance and credit(Kalumbia,2022).Refiners and traders capture the most value in the cane sugar v
152、alue chain.The sugar cane market involves thousands of companies,including producers,mills,refiners,wholesalers,traders,and retailers around the world.The cane sugar value chain is highly concentrated,with a small number of players controlling refining and merchandising.The value of sugar is much hi
153、gher than the value of the cane from which it is produced.In addition to this,the upstream part of the chain is very inflexible,as the role of small-scale farmers is restricted to growing and harvesting the cane that must be hauled by truck to the closest sugar mill.Farmers depend heavily on the mil
154、l to buy and process their produce,leaving little room for negotiation or innovation while coping with rising production costs and a lack of access to finance and quality inputs(Sattayathamrongthian&Vanpetch,2020).Sugar cane mills typically own some strategic farms,giving some vertical integration f
155、rom the mill back to the farm.This helps the mill assure supply and maintain a constant minimum output through the season.Mills have also invested heavily in technology and innovation,which is needed in the processes of extraction,clarification,boiling,crystallization,and centrifuging.When the sugar
156、 cane is destined for domestic markets,it is transported from a mill to a local refiner for further purification(Spencer,2020).Frequently,the company that owns the mill also owns the refinery.Wholesalers then purchase the cane sugar,although the refiner itself can be the brand and therefore manages
157、the marketing logistics.The cane sugar would be sold either in supermarkets for home use or to industrial buyers for use in products such as baked foods,confectionary,and other products that end consumers will purchase.It is important to note that cane sugar prices vary according to the type,quality
158、,and specificationfor example,special unrefined brown sugar is more valuable than processed white sugar(Fairtrade International,2020).As for sugar destined for international markets,after processing,the raw cane sugar is transported to a terminal or port and shipped to refineries in consumer countri
159、es where it is further processed into white refined,brown,or granulated cane sugar and sold to large manufacturers of consumer products(Spencer,2020).The most value in the chain is generated during the processing,refining,trading,and marketing stages.Globally,six firms control two thirds of the inte
160、rnational trade in both raw and refined cane sugarBunge,Cargill,Czarnikow,ED&F Man,Louis Dreyfus,and Sucdenlocated in the United States and Europe(Ceres,2017;Fairtrade Foundation,2013).These sugar-processing companies and large corporations benefit from higher bargaining power over the upstream grow
161、ers(Simar,2018).They also have more financial and human capacity to invest in capital-intensive technologies to process cane sugar.They are generally more protected against volatility and external shocks as they are increasingly integrated across the value chain and undertake arrangements IISD.org/s
162、si 18Global Market Reportsuch as strategic alliances,licensing and franchising agreements,and joint ventures to gain market power at local and regional levels,which permits them to maximize profits and mitigate potential risks(Wood et al.,2021).Some of these companies have subsidiaries involved in g
163、rowing and milling sugar cane in developing countries,and,in some cases,they are involved in marketing and packaging processes to retail(Fairtrade Foundation,2013).However,even further up the value chain,cane sugar is not a freely traded commodity.This causes difficulties for exporters to access new
164、 markets in developed economies like the United States or the European Union that have policy instruments in place favouring domestic growers,such as supply management,private storage aid,and import quotas(relevant only to the United States)(Schnepf,2021).At the retail level,there is little change o
165、r innovation for refined or white cane sugar,which is also frequently on sale to attract interest from end consumers.There is not much value-added to retail cane sugar,except in specialty confections,such as coloured sugars for decorating candies and pastries.In general,the sugar cane market present
166、s a more homogenous,flatter structure with difficulty in finding a value-added proposition that permits actors upstream in the supply chain to obtain higher margins.This contrasts with other commodities that have a high value added in the distribution channel,such as cocoa or cotton,where diversific
167、ation into new product lines adds economic value and contributes to the bottom line.What have VSSs done to pricing in the sugar cane sector?Unlike the way they have for other agricultural commodities such as coffee,cocoa,or tea,VSSs have not yet implemented minimum price mechanisms or living income
168、benchmarks for certified farmers in the sugar cane sector.VSSs such as Fairtrade and Bonsucro consider that price-setting mechanisms in the sector are very complex and distorted,and offering fixed minimum prices could be detrimental to VSS-compliant farmers and producers(Bonsucro,2021d;Fairtrade,202
169、3b.;Fairtrade International,2020).However,Fairtrade International encourages the adoption of revenue-sharing systems from cane sugar mills to farmer organizations.The standard also has a system of premiums in place.Small-scale farmers and producers organizations associated with the standard benefit
170、from a Fairtrade premium of USD 60 per tonne of cane sugar and USD 80 per tonne of organic cane sugar sold on Fairtrade terms(Fairtrade International,2023a).This premium is paid on top of the regular sales price,which can be the international market price or the fixed price settled by the producing
171、country(Fairtrade International,2023b).Bonsucro has in place a system of credits and physically traded cane sugar.On the one hand,Bonsucros certified products,such as cane sugar,ethanol,or molasses,can be sold through a physical supply chain following the IISD.org/ssi 19Sugar Cane Prices and Sustain
172、abilitymass balance principle,4 where producers(farms and mills)may receive premiums or higher prices than the conventional market.On the other hand,producers can also sell credits through an online platform launched in 2019.These credits are traded separately from the physical product,and the physi
173、cal cane,sugar,ethanol,or molasses that each credit represents is sold as conventional in the market.One credit represents 1 tonne of sugar cane,raw cane sugar,or molasses or 1 cubic metre of ethanol produced under Bonsucros terms(Bonsucro,2023).Through the platform,sellers(certified mills and farme
174、rs)can offer their credits,while buyers(traders,manufacturers,and retailers)can bid on these credits based on their needs.The system automatically matches transactions based on price,allowing producers to obtain premiums for products that were not purchased through a physical supply chain and buyers
175、 to make claims about their procurement objectives or publicly support the growth of a more sustainable sugar cane sector.Producers and buyers can also negotiate credits outside of the platform and,if they have reached an agreement,confirm the deal on the platform.According to Bonsucro data,credit p
176、rices vary by product,with sugar cane credits receiving the lowest average premiums of USD 0.18 per tonne,followed by molasses at USD 0.26 per tonne,raw cane sugar at USD 0.88 per tonne,and ethanol credits receiving the highest average prices of USD 2.34 per cubic metre(Bonsucro,2023).The platform r
177、etains a fee that goes into the Bonsucro Impact Fund.4 The Bonsucro Chain of Custody Standard focuses on the mass balance principle.This is a system for monitoring the inputs and outputs of certified material/product throughout the supply chain.It allows for mixing these materials/products with non-
178、certified material at any stage of the supply chain,provided that the outputs of certified material/product do not exceed the inputs of certified material/products(Bonsucro,2019).The market for physical trade and credit trades of sugar cane compliant with the Bonsucro standard has grown significantl
179、y in recent years(Bonsucro,2020a).Between 2020 and 2021,more than 1.6 Mt of raw cane sugar credits were sold through the platform.Also,Bonsucro noted in its outcome report 2021 that certified farms reported up to 23%higher wages for the lowest-paid worker at the mill and 20%higher incomes at the far
180、m level(Bonsucro,2022).However,it is important to note that in terms of global supply,certified cane sugar still represents 7%to 8%of total global production,challenging the potential impact of VSSs to increase wages and incomes across the board.To better illustrate how VSSs premiums are positioned
181、in the sugar cane sector,Figure 5 shows the average international free-on-board(FOB)price for raw sugar cane in 20102022(ICE contract No.11)and the average Fairtrade and Bonsucro prices(FOB),including premiums from 2019 to 2022.It also shows the average sugar cane producer prices in Brazil,India,and
182、 Thailand in the 20192022 period.It should be noted that the prices represented in the figure are estimates and do not reflect the reality of all sugar cane growers in these countries.According to our analysis and the data shown in Figure 5,cane sugar producers associated with VSSs,such as Fairtrade
183、 and Bonsucro,may receive premiums above the average world FOB price for conventional raw cane sugar.As of 2019,producers in IISD.org/ssi 20Global Market Reportmajor producing and exporting countries that are compliant with these two standards may have received prices that are up to 20%higher than t
184、hose selling conventional raw cane sugar when receiving premiums either through physical sales or credit trades.Mills or cooperatives that sell raw cane sugar pay sugar cane growers a share of this price,which can be negotiated between producers and millers or determined by the government.As an exam
185、ple,sugar cane producers in Brazil,Thailand,and India received between 6%and 9%of the average FOB price of raw sugar cane sold in the international market(Zancaner,2022).What stands out is that,as of 2019,producers in Brazil,Thailand,and India associated with Fairtrade International may have receive
186、d higher FOB prices than those growing and selling conventional raw cane sugar to the export market(about 13%higher prices,including premiums).In addition,premiums tend to rise with double certification of Fairtrade and Organic,reaching as much Figure 5.International market price for raw cane sugar,
187、20102022(FOB);average prices and premiums for Fairtrade and Bonsucro credits(FOB);and average prices received by raw cane sugar(FOB)and sugar cane producers in Brazil,India,and Thailand(farm gate),20192022(USD/tonne)Note:Data for the raw cane sugar international market price is for 20102022;all the
188、other data points in the figure are for 20192022.*These values are for raw cane sugar.Source:Authors elaboration based on Barros,2021;The Economic Times,2018;Fairtrade International,2023a;FAOSTAT,2023;Makgopa&Woody,2022;OECD&FAO,2022.Price(USD/tonne)Average Fairtrade organic premium(FOB):USD 520/ton
189、ne*Average Bonsucro premium credits(FOB):USD 440.88/tonne*Average Fairtrade conventional premium(FOB):USD 500/tonne*Average raw cane sugar conventional(Brazil,India,Thailand FOB):USD 440/tonneAverage international market price(FOB),20192022:USD 370.8/tonneAverage Bonsucro premiums sugarcane credits(
190、farm-gate):USD 28.38/tonneAverage sugar cane producer prices(Brazil,India,Thailand):USD 28.2/tonne02001003004005006007002010201220142016201820202022International market priceIISD.org/ssi 21Sugar Cane Prices and Sustainabilityas 20%higher prices than producers selling conventional raw cane sugar(see
191、Figure 5).In addition,according to Figure 5,prices and premiums obtained through Bonsucros credit platform in these three countries are at almost the same level as conventional raw cane sugar averages at FOB prices and farm gate prices,with producers obtaining less than 1%of higher prices per tonne
192、of certified raw cane sugar or sugar cane sold.This is a minimal gain that hardly serves as a motivating factor for producers to go through the effort of pursuing certifications.However,this might be because the platform is relatively new;premiums are not fixed but rather depend on the willingness o
193、f the buyer;and the system is presented by Bonsucro as an alternative when volumes of certified sugar cane or raw cane sugar have not been sold in the physical market.Unfortunately,information is lacking regarding the prices or premiums that Bonsucro-certified producers receive when they sell physic
194、al certified sugar cane or raw cane sugar.These values in the physical market may vary from credit transactions negotiated through the platform.Evidence of the direct effects of VSSs on farmers prices and incomes is very limited.Some studies show that the benefits for farmers complying with VSSs in
195、the sugar cane sector are not based on the provision of minimum prices and premiums but rather on other factors that ultimately increase their incomes or reduce their production costs.Standards usually offer guidance and support to farmers that can result in cost reductions.In India,for instance,VSS
196、-compliant farmers are seeing benefits in yield improvements and more resilient crop varieties compared to non-certified farmers(Deloitte,2021).However,obtaining premiums is critical to recovering investments,and this is proving difficult due to the governments strict pricing regulation,which leaves
197、 no monetary incentives for producers to become certified.Despite the challenges of accessing premiums,certified producers and mills can benefit from cost reductions that result in higher profits.These reductions are higher in sugar cane mills with bigger certified areas that have presented lower un
198、it costs compared with non-certified ones(Deloitte,2021).For instance,a WWF Brazil study found that the average productivity of Brazils Bonsucro-certified sugar cane plantations was 15%higher than the national average and 54%greater than non-certified growers from the same mill.The increase in produ
199、ctivity and quality of the raw material delivered to the mill led to a 9%increase in certified growers incomes compared to non-certified growers and 22%compared to the average grower income in Brazil during the same harvest.These results were achieved due to better plantation management and the adop
200、tion of better techniques and use of resources(WWF Brazil,2014).In addition,the certification process facilitates data collection and better-quality data that are very helpful for planning investments(Deloitte,2021).The adoption of VSSs in the sugar cane sector also creates an opportunity for greate
201、r awareness and consensus on the socio-economic issues in the sector,as many of them enable an environment where multistakeholder dialogue is encouraged(Jenkins et al.,2015).However,many argue that VSSs in the sugar cane sector are not strong enough to support a stable and sustainable increase in pr
202、ices,as demand for sustainably produced cane sugar is still very nascent and,generally,it does IISD.org/ssi 22Global Market Reportnot come with a willingness to pay higher prices(Jenkins et al.,2015).Also,there is a lack of evidence across the board on how VSSs in the sector enhance productivity or
203、production cost savings.Although some farmers and mills can benefit from premiums and cost reductions from participating in VSSs,cane sugar is still considered a homogeneous product,and the scope for earning higher prices and premiums is very limited.Most buyers are unwilling to pay premiums,as end
204、consumers do not demand sustainable cane sugar and are not concerned about the methods of sugar cane cultivation(Deloitte,2021).Overall,there is a lack of awareness from governments,companies,and end consumers about the availability and benefits of more sustainable cane sugar.In response to these co
205、ncerns,VSSs,including Bonsucro,are working to implement living wage approaches in their standards for the years 20212026,as well as increasing legal minimum wages above 30%for farm workers and 45%for sugar cane mill workers after 5 years of certification(Bonsucro,2021d),though there is no report yet
206、 about the implementation of living income approaches targeting farmers.Also,Bonsucro is partnering with financial providers to improve access to sustainability-linked finance for certified members by enabling them to disclose relevant data on carbon metrics and reduce financial risk.Furthermore,the
207、 standard is considering convening the sector around payment for environmental services(PES),seeking to pay landowners to adopt good agricultural practices and protect the environment(Bonsucro,2020c).The cane sugar sector is subject to public interventions that distort the global market.The cane sug
208、ar sector is one of the most highly regulated industries in the world,subject to measures such as minimum prices,subsidies,import quotas and duties,and export subsidies(Jenkins et al.,2015;Mpapalika,2019).As the crop is cultivated in many parts of the world,almost all producing and exporting countri
209、es attempt to protect the competitiveness of their local industries and insulate their domestic markets from price fluctuations.For instance,the United States,traditionally a sugar-deficit country,has put policies in place to foster domestic production of both sugar cane and beet and restrict import
210、s(OECD&FAO,2022).The U.S.government imposes high tariff-rate quotas and high out-of-quota tariffs to restrict the amount of imported sugar,either beet or cane sugar(USD 0.339/kg for raw sugar)(Makgopa&Woody,2022).The country also supports domestic prices at or above USD 0.20/lb.When world sugar pric
211、es are near or above the U.S.base support price,U.S.sugar prices,for both beet and cane,must be at least slightly higher than world prices to cover the marketing expenses arising from importing tariff-rate quota sugar.Other importers of cane sugar,such as the European Union,grant duty-free access to
212、 the their market to developing countries under the Everything but Arms agreement and economic partnership agreements with African,Caribbean,and Pacific countries,which have many sugar cane producers(European Commission,2023b).China has IISD.org/ssi 23Sugar Cane Prices and Sustainabilityalso imposed
213、 strict import quotas for more than a decade.Under those rules,companies with quota licences can bring in sugar at a preferential rate of 15%,while those that do not have a quota share import cane or beet sugar at a 50%tariff(Li,2023).Producing countries,including India and Thailand,have several reg
214、ulations to support their domestic cane sugar industries and have been accused by other WTO members,such as Australia,Brazil,and Guatemala,of using subsidies and other pricing measures that distort the global sugar market(Deloitte,2021).In 2022,Thailand amended its Cane and Sugar Act to deregulate d
215、omestic cane sugar price controls and terminate the government cane sugar sales administration after losing a WTO case against Brazil in 2016.Thailand was accused of violating WTO rules by fixing high domestic prices and subsidizing farmers and millers through its benefit-sharing system,a system tha
216、t shared the profits from sales in the domestic and export markets,allocating 70%of the industrys net profit to sugar cane farmers and 30%to sugar companies or millers(Manivong&Bourgois,2017;Prasertsri,2023).Thailands Cane and Sugar Fund was created to support the sugar cane industry and boost resea
217、rch and development for sugar cane production.Sugar cane millers must contribute to the fund by collecting the price difference between domestic wholesale prices and world raw cane sugar prices(Prasertsri,2023).This money is used to provide direct payments to growers when sugar cane market prices ar
218、e lower than the minimum prices established by the government(Prasertsri,2023).The fund also facilitates soft loansat a fraction of market interest ratesto buy inputs or equipment and machinery and provides input subsidies to sugar cane growers and subsidies for the production of ethanol,mostly from
219、 cane molasses(Meriot,2015).In addition to fixing minimum prices for farmers,the Indian government regulates the domestic retail price by using marketing quotas and centrally managed stocks(McConnell et al.,2010).India has also been offering subsidies to help cane sugar exporters in the form of dire
220、ct credits in the farmers account on behalf of the mills.These subsidies cover marketing costs,handling,upgrading,and international and domestic transport charges.Furthermore,the government fixes minimum export quotas to reduce cane sugar stocks.This system settles the minimum quantity that the mill
221、s must export to ensure that excess stocks of sugar in the domestic market do not lead to a decline in cane sugar prices(Deloitte,2021).The policy environment around sugar cane production creates uncertainty,as the sector remains highly regulated despite the efforts of some exporting and importing m
222、arkets,including the European Union and Thailand,to deregulate it(OECD&FAO,2021).The FAO(n.d.)suggests that policies and government intervention have made the sugar sector(both beet and cane)the most distorted of all agricultural commodity markets.Also,these protective measures have had an impact on
223、 low-income sugar cane-producing countries that do not have the capacity to implement such domestic programs,representing significant losses to thousands of small-scale farmers and mills that cannot protect against price volatility or compete in the international market.IISD.org/ssi 24Global Market
224、ReportA Way Forward:What is needed to build a more sustainable sugar cane sector?Despite some efforts to provide better price remuneration to sugar cane farmers,more must be done to ensure that production can expand sustainably,producers are rewarded for implementing more sustainable practices,and f
225、air market access is assured.Addressing farmers needs,especially in training on business,good agricultural practices,and access to market pricing information,can help improve the livelihoods of the large number of smallholders around the globe who make up the sugar cane sector.The complexity of the
226、value chain,along with heavy regulations from major producing,exporting,and importing countries,significantly weakens the leverage of stakeholders acting on their own to produce a meaningful change in the industry.Collaboration is needed from all actors to create effective incentives to promote a mo
227、re sustainable sugar cane sector,develop coordinated government policies,and allocate responsibilities and financial costs for the negative externalities of producing sugar cane to all links in the value chain,especially those at the downstream stages.Supporting the adoption of VSSs in the sector co
228、uld be a way not only to produce higher-quality cane sugar and increase yields but also to promote stakeholder dialogues grounded at the country level.For sugar cane farmers to implement the necessary modifications in their operations,knowledge of the relative importance of the resource inputs affec
229、ting sugar cane yield is essential(Thibane et al.,2023).It is also important to understand the costs and benefits of driving the adoption of more sustainable production and consumption in the sugar cane sector and how they accrue to different players along the value chain.Greater coordination is als
230、o required of VSSs,as well as among private initiatives.Both can play a key role in implementing measures to make the business case for VSSs and boost demand for more sustainably grown sugar cane.Following are some of the best practices and measures that governments in producing and consuming countr
231、ies,private sector actors,and VSSs should consider to make the sugar cane value chain fairer,promote better distribution of value,increase farm gate prices,and mitigate the effects of external shocks on farmers incomes.Governments in major producing countries can adopt mechanisms and policies to sup
232、port and financially reward more sustainably produced sugar cane by helping farmers join VSSs and improve their business cases.Producing countries have strong motives to push and transition toward more sustainable practices in the sugar cane sector,as climate change,unfavourable weather events,and p
233、olitical and economic turmoil are having a major impact on cane sugar output and prices.Severe episodes of drought are already forcing sugar cane growers to switch to alternative drought-resistant crops,given that sugar cane is water intensive(OECD&FAO,2022).Policy and regulatory support are necessa
234、ry to ensure the adoption of more sustainable sugar cane production practices,better management,and procurement practices in IISD.org/ssi 25Sugar Cane Prices and Sustainabilityproducing and importing countries,as well as to increase financial sustainability for farmers.Many producing countries have
235、pricing systems in place and have developed formulas that consider criteria like recoverable sugar value content,export volumes,futures prices,and others.However,including a sustainability component in these formulas could be a way for these producing and exporting countries to maintain governance o
236、ver pricing systems in the sector while providing an opportunity to remunerate farmers who implement more sustainable practices.For instance,Mexico has developed a Law for the Sustainable Development of Sugar Cane(Ley de Desarrollo Sustentable de la Cana de Azucar,2005)that promotes more sustainable
237、 production practices.Despite sustainability being an important component in public policies in the domestic sugar industry,the chapter related to payment systems does not include a sustainability component in the price determination for sugar cane.There is an opportunity to revise these policies an
238、d adapt pricing systems to adequately compensate farmers and producers that grow,process,and sell more sustainable sugar cane.Also,capacity building offered by VSSs,national industry associations,and mills is critical to supporting the livelihoods of farmers and workers in the sugar cane sector.Thes
239、e actors can implement measures,offer incentives,or pay for capacity-building activities by using membership fees(Jenkins et al.,2015).A great incentive to sugar cane farmers would be to improve harvesting and drive down the cost of transportation,as they are usually rewarded for quality and product
240、ivity,and it is therefore essential that careful attention is paid to costs and efficiencies wherever possible.It is often difficult for the millions of small farmers worldwide to compete against medium-sized and larger growers that can streamline costs with economies of scale.In this case,joining V
241、SSs can be a way for farmers to organize in cooperatives and enjoy greater access to resources,as some evidence suggests that VSSs can strengthen cooperative organizations and contribute to enhanced social capital for producers,which can also facilitate better access to markets,training opportunitie
242、s,reduction in transaction costs,and access to financing(Elder et al.,2021).Some countries are already moving in that direction.In Mauritius,the government refunds sugar cane farmers and mills half of the costs related to certification,testing,and accreditation.The government has implemented this st
243、rategy as part of its plan to move the sector toward more sustainability,produce more sustainable energy based on certified ethanol,and grow the countrys economy(Bonsucro,2021b).VSSs can also support smallholder farmers in countries with little support from governments to increase productivity to me
244、et growing demand while also breaking the cycle of poverty.In one example,in Belize,investments in quality-improvement programs and integrated pest management in sugar cane boosted productivity by 21%,resulting in a 30%increase in farmers cane revenue(Ceres,2017).In addition,monetary incentives can
245、be given to sugar cane farmers who diversify or adopt technologies,such as mechanization,that drive improved quality and productivity and other practices that reduce the environmental footprint of sugar cane,including those complying with IISD.org/ssi 26Global Market Reporta certification scheme.The
246、se incentives could be payments for implementing good agricultural practices,environmental services,or carbon sequestration(Pieiro et al.,2022).Governments can also support sugar cane farmers in protecting the integrity of freshwater bodies by enacting regulations and linking financial incentives to
247、 farmers who adopt measures to preserve aquifer reserves or biodiversity or to those who adopt mechanisms to preserve air quality and avoid cane burning.For example,since 2020,Thailands government has offered a subsidy to farmers who refrain from burning their sugar cane fields during harvest to hel
248、p ease air pollution.All farmers are entitled to THB 120/Mt of their harvest for the season,which represents about USD 3.43/tonne in addition to the minimum fixed price(Theparat,2020;Vietnam Plus,2021).In India,the government is also considering offering additional compensation of INR 6,000(USD 72.4
249、5)per hectare as an incentive to farmers for using alternative cultivation patterns that are less water intensive(The Economic Times,2020).VSSs can work toward developing financing mechanisms and improving access to finance for growers and mills.Given that fixing minimum prices and premiums for suga
250、r cane growers has proven a challenge for VSSs because the global sugar sector remains heavily regulated and distorted,they can further contribute to the well-being of farmers,incentivizing them to become certified by offering compliant farms and mills access to financing mechanisms.Some VSSs,such a
251、s Bonsucro,are exploring the possibility of partnering with financial providers to improve access to sustainability-linked credits for certified sugar cane farmers.In Brazil,for instance,Bonsucro-certified sugar cane farmers have been given access to credit lines with lower interest rates based on t
252、heir sustainability credentials(Bonsucro,2021a).The lack of access to finance for the sector is a major constraint in many countries,including South Africa(personal communication,Bonsucro representative,March 2021).Investments at the farm,transport,and mill levels,as well as for diversification,coul
253、d have a huge positive impact on sugar cane growers and millers.However,banks and other financers in the country are reluctant due to the instability of the domestic and international cane sugar prices,the changes in climate resulting in longer droughts,and inadequate government policies on land ref
254、orm(International Energy Agency,2022).VSSs can leverage their experience in South Africa to influence and support ongoing processes,such as the implementation of its sugar cane master plan,to make environmental and social considerations a priority and regain investors trust.Bonsucro is also studying
255、 the viability of PES for sugar cane producers in Brazil.Its study shows that these types of incentives can add financial value for farmers and are an important stimulus to guide better practices to preserve land and habitats and enhance livelihoods in sugar cane-producing communities(Bonsucro,2020c
256、;Geoflorestas,2020).Some PES models that can work for the sugar cane sector are carbon credit markets that could be implemented by the public and private sectors;development of green financial products(loans,bonds,insurance);government programs in which taxes are converted into PES investment funds;
257、and co-shared programs between IISD.org/ssi 27Sugar Cane Prices and Sustainabilitybrands,for instance,by rewarding the best-rated sugar cane suppliers and farmers based on environmental criteria(Bonsucro,2020c;Geoflorestas,2020)Diversification is key to increasing farmers incomes.Supporting farmers
258、and processors in generating alternative sources of income when cane sugar prices are low is essential.There is an untapped opportunity to develop renewable outputs from sugar cane refinery operations.In addition,VSSs could support the diversification projects of associated smallholder farmers and m
259、ills into green energy products from sugar cane processing.This support could drive more VSS adoption,as such projects can contribute to climate mitigation efforts.The largest sugar cane producers,namely Brazil and India,have commercial-scale bagasse5 co-generation plants,and other sugar cane-produc
260、ing countriessuch as Australia,Guatemala,Kenya,Mauritius,the Philippines,Uganda,and Vietnamare also using the bagasse as an alternative source of energy(Seng To et al.,2018).In Australia,for instance,some of these milling companies use bagasse-generated electricity to operate their factories,while t
261、he surplus power is sold into the national electricity market(Bagshaw,2022).Another way to diversify is to use bagasse as a feedstock for synthetic biology to make synthetic foods or fibres.While sugar will continue to account for most of the end usage of sugar cane in the world,the crop has other p
262、otential uses that show promise(i.e.,biofuel,sustainable aviation fuel,bioplastics,packaging,and paper from bagasse).For instance,the bioplastics market could add significantly to the demand for 5 Bagasse is the fibrous material left over after the sugar cane has been crushed.sugar,and potentially f
263、or VSS-compliant sugar cane,as the market is expected to grow exponentially(at a CAGR of 16.1%from 2020 to 2027),driven by policies such as the European Unions decision to reduce the production and consumption of single-use plastics by about 80%by 2022(Bonsucro,2021d)The sustainable use of sugar can
264、e,as well as certification,can be pursued in the emerging markets of sugar by-products to benefit farmers and increase their incomes as well.In India,for instance,the use of sugar cane for ethanol can be a viable option to absorb excess production and regulate prices(Deloitte,2021).Another initiativ
265、e that governments in producing countries can support in cooperation with VSSs is the production of biofertilizers from sugar cane waste.There is an interesting case of small farmers and students in Ghana who have joined to develop a bio-compost fertilizer from sugar cane waste that can ensure bette
266、r soil quality,increase crop yields,and provide an additional source of income(they also sell to local farmers)(DW,2021).These experiences have the potential to be replicated in other regions and used by smallholder farmers as a strategy to increase revenues from sugar cane farming.Expanding these d
267、iversification efforts would require support from VSSs and industry actors,but also appropriate government policies and incentives to promote investment.For instance,increased policy support for ethanol production as part of Brazils National Biofuels Policy to reduce GHG emissions,RenovaBio,has gene
268、rated an additional revenue stream for sugar cane IISD.org/ssi 28Global Market Reportproducers and processors,adding flexibility to switch between cane sugar and ethanol production depending on market conditions(Barros,2021;McConnell et al.,2010).Future demand for ethanol biofuel could potentially e
269、xpand sugar cane farming land in Brazil by 5 million ha by 2030(ScienceDaily,2019).Accordingly,sugar cane farmers can benefit from ethanol demand due to the strong demand for sugar cane.The lack of this type of policy support in other countries,such as South Africa,has limited investments in the bio
270、fuel sector,although the potential is being investigated as part of its sugar cane master plan.Governments and the private sector should incentivize the consumption of more sustainable cane sugar in producing countries and by the private sector.Despite efforts made by VSSs and other actors in the se
271、ctor,demand for sustainably produced cane sugar is still low.Multinationals operating in the food and beverage sector,based in Europe and North America,largely drive VSS compliance for sugar cane.The main reason they want sugar cane farmers to comply with VSSs is related to managing reputational ris
272、ks.Indeed,one of the biggest limitations for the expansion of a more sustainable sugar cane industry is that these large companies buy only a small portion of VSS-compliant cane sugar.Other limitations are growing concerns about the relationship between sugar consumption and chronic diseases,the imp
273、osition of sugar taxes,and competition from other sources,such as sugar beet.Most cane sugar is consumed in the country of production,where buyers usually have little awareness of environmental and social concerns in the sector.In Africa,for example,countries like South Africa,Mauritius,and Eswatini
274、 export significant volumes of their raw cane sugar,while in the rest of the continent,production goes to local markets and processors.The continent exports approximately 26%of its total production and consumes the remaining(Common Market for Eastern and Southern Africa,2019;ResourceTrade.Earth,2022
275、).As long as the demand for conventional cane sugar remains strong in developing countries,VSSs will be ineffective in meaningfully curbing unsustainable practices in the sector.This is why expanding VSS compliance in sugar cane production and processing will have to happen by creating demand for mo
276、re sustainable cane sugar in both producing and consuming countries.Governments in producing countries can push for more sustainable consumption of cane sugar by developing targeted procurement programs and educational campaigns.The private sector can also play a role and move the sugar supply chain
277、 toward more sustainability.Food and beverage manufacturers,traders,and retailers can indirectly influence production practices and supplier standards in their supply chains.For this,it would be necessary not only to commit to purchasing more VSS-compliant cane sugar but also to implementing initiat
278、ives to support farmers financially to adopt more sustainable growing practices,promote better trade relations and direct trade relationships with mills run by producers associations,and commit to paying premium prices to growers who implement more sustainable production practices.These companies ar
279、e sensitive to external pressure and responsive to market trends and consumer preferences(Ceres,2017).IISD.org/ssi 29Sugar Cane Prices and SustainabilityIndeed,sugar sector enterprises(traders,food manufacturers)need to perceive social,economic,and environmental issues in sugar cane production as a
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