May 19, 2015 / 8:04 PM / in 3 years

Brazil sugar producers eye trade case against India, Thailand

BRASILIA/SAO PAULO, May 19 (Reuters) - Brazilian sugarcane producers are gathering evidence to persuade their government to launch a trade case against India and Thailand over subsidies, highlighting growing global trade tensions stoked by the plunge in commodity prices.

Eduardo Leão, executive director of the Brazilian cane industry association Unica, said the group hired an international law firm to dig into the subsidy programs, which they estimate could cost the South American country $1.2 billion a year in lost revenue.

“We are determined to challenge both countries,” said Leão. “Our role now is to deepen our analysis and convince the government that we are getting hammered by these subsidies.”

Brazil, the world’s largest sugar exporter, has brought questions about incentives for Thai and Indian sugarcane producers to the Agricultural Committee of the World Trade Organization. The country has grown more concerned about those programs at a time when global sugar prices are at six-year lows.

The Thai and Indian embassies in Brazil did not immediately return calls seeking comment.

Raw sugar futures in New York, weighed down by a supply glut fed by large Indian crops, are hovering around 12 cents per pound, levels last seen in early 2009.

Brazil, whose economy appears headed for its worst recession in 25 years, is aggressively protecting its share of the global food market as a commodity boom fades. Last year Brasilia launched a case against Indonesia for restricting poultry exports and officials are considering challenging the United States over soy and corn subsidies.

Disagreements over rural subsidies also threaten efforts to revive a long-delayed global trade agreement known as the Doha Round.

Sugar prices have been slumping at a time when Brazilian sugarcane producers were already struggling because of government fuel policies that have reduced demand for ethanol.

According to preliminary estimates by Brazilian consultancy Agroicone, Indian and Thai subsidies would add 4 million tonnes of sugar, or nearly 7 percent, to world supply, dragging down prices 13 percent.

Unica’s Leão said producers are more concerned with Thailand’s policies. That country’s share of global exports has risen 4 percentage points to 16 percent in the last three years. Brazil’s share has fallen by 5 percentage points to 48 percent during the same period, according to Unica.

It may be difficult to prove that Thai authorities are breaking trade rules with policies that include local price supports for producers and a fund to help farmers. Still, Brazil’s government may be willing to try.

“In the case of Thailand, it is a very complex system, but if producers are able to build a strong case the government will without a doubt support them and launch a case,” said a senior Brazilian official involved in trade policy.

Challenging India’s sugar subsidies may be more difficult politically for Brazil, since the countries are partners in the BRICS group of large emerging economies. India is also a player in talks to seal a global trade deal brokered by Brazilian diplomat Roberto Azevedo, new head of the WTO. (Writing by Alonso Soto; Editing by David Gregorio)

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