An Australian sugar cane farmer representative said a reported positive World Trade Organization preliminary ruling against European Union sugar subsidies should have a positive impact on world prices.
An analyst also said the WTO ruling could compound the positive impact of a global tightening of supply already underway.
Ross Walker, chairman of Australian Cane Farmers Association, said the WTO ruling could result in about two million metric tons of subsidized EU sugar being withdrawn from the global market.
“This should only have a positive effect on the world price and therefore a major effect on Australian sugar cane farmers,” who aren’t subsidized but are subject to the global price, Walker said in an interview on Australian Broadcasting Corp. radio.
He was commenting after news of the ruling, which came after Brazil, Thailand and Australia accused the EU of breaking WTO rules by subsidizing sugar exports over and above accepted levels.
The three nations, all major exporters of the sweetener, argued EU sugar subsidies distort international prices, causing them to lose revenues.
Australia’s Trade Minister Mark Vaile echoed comments from Brazilian officials in welcoming the WTO preliminary ruling, which hasn’t been officially issued and which can be appealed.
“We are quite confident that as we go through the remaining procedures in Geneva, it will be a good outcome for Australia and Australian sugar producers in terms of a strike against the excessive use of export subsidies on sugar, which distorts the global market,” Vaile said on ABC radio.
Toben Gorey, an economist at Commonwealth Bank of Australia, agreed the long-term outlook for sugar prices is positive, with a number of developments on the trade front compounding the impact of shorter-term fundamental market factors.
Global supply is tightening anyway, he said, in part reflecting a downturn in production in India, which in turn likely will result in a swing to substantial importing in 2005.
“Some of these changes to trade arrangements, particularly the EU’s regime both from this and their own promised reforms, will have some effect on prices down the track,” he said.
These, plus the WTO’s Doha Round of multilateral talks getting back on target, is “adding to the positive background” for prices, he said.
Cane Farmers’ Walker said growers had despaired for decades about achieving any reform of the distorted global sugar market.
The WTO ruling has been a “been a long time coming,” he said.
“This is a major step forward, hopefully this will flow on to some of their (EU) domestic subsidies, which are very high also,” Walker said.
(Dow Jones. News Provided by COMTEX)