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When Australia, Brazil and Thailand challenged the EU’s domestic subsidies and protection of its sugar industry at the WTO, the EU decided to use this case as an opportunity unilaterally to undo its long-standing Sugar Protocol with its former colonies and to make significant changes to its domestic regimes.

Quotas still remain to protect EU producers, but these have been reduced and weakened, such that production within the EU will increasingly be concentrated in just a few major sugar producing regions, with the EU no longer dumping subsidised sugar on the global market.

The EU market has also been opened up to quota-free, duty-free imports from least developed countries (LDCs) and countries that have signed up to the Economic Partnership Agreements. This means that the former colonies will no longer be able to sell at EU-protected prices, making exports to the EU market uneconomical for all but the lowest-cost producers among them. [3]

As the EU’s sugar reforms come into full effect in 2009, the EU is expected to switch suddenly from being a net exporter, dumping millions of tonnes of subsidised sugar on the global market, to a net importer.

This is already generating a move to relocate sugar production away from countries such as Fiji, Île de la Réunion and much of the Caribbean, where the costs of production and transportation are high, to countries such as Sudan, Ethiopia, and Mozambique, where the costs of production are low and where there is favourable access to the EU, in terms of both trade agreements and transport. Moreover, outside the EU, large sugar refiners, hungry for sources of cheap sugar to replace the EU exports, are now looking around for alternative supply routes.

The third key development changing the map of global sugar production is the monumental rise of agrofuels. Sugar cane is seen as one of the most cost-effective raw materials for the production of ethanol, if not the most cost-effective. The global market for ethanol is growing fast, as a number of major markets for transport fuels have or are about to put in place mandates that require certain percentages of ethanol to be mixed with petroleum.

Before the financial crisis of 2008 and the collapse in oil prices, the sugar industry was awash with investment for new ethanol plants. Lately this investment has slowed, with many projects being delayed or shut down. Still, the government mandates are enough to keep a sizeable amount of money flowing into ethanol production, and there are many large-scale ethanol projects, complete with sugar plantations, coming on stream around the world, pushing sugar production into new areas.

Investments are also being made in technologies that could open up new markets for sugar-cane-based agrofuels. [4] In short, the growing agrofuels market has greatly boosted demand for sugar, which, in turn, has expanded global sugar production.

High Times for Agribusiness

Big agribusiness is driving these changes to global sugar production and pocketing the proceeds. The major European sugar corporations have used the EU sugar reforms, for instance, to consolidate their control over quota production in the EU and to move into overseas production in lower-cost areas with preferential access to the EU. [5]

But the big players from the South in the sugar industry, which have traditionally focused on national production, are starting to expand overseas as well. For example, Thailand’s largest sugar company, Mitr Phol, is setting up operations in Laos to produce for export to the EU through a joint venture with Tate & Lyle, while Colombia’s Manuelita sugar company has expanded into Peru and Brazil.

Sudan and Ethiopia have become particularly important targets for investment from southern investors, something their governments are embracing. The government of Sudan says that it wants to expand sugar cane production in the country from the less than 200,000 hectares currently under production to 1.7 million hectares. [6]

There are new players getting into the sugar industry too, mainly for ethanol. The giants of the grain trade, who until recently were not much involved in sugar cane or sugar beet production, are now moving aggressively into the industry. Cargill, which already controls 15 per cent of the global sugar trade, has recently made major investments in sugar cane production in Brazil and Mexico, and has launched new joint venture refineries and/or ethanol operations in Syria, India and El Salvador.

Even ADM, the king of US corn ethanol, launched its first major investment into Brazilian sugar cane in 2008, with a joint venture that involves two sugar/ethanol plants and large-scale plantations. The same goes for the energy and natural resource companies based in the North and the South – both big established players, such as BP, and smaller venture capitalists from the mining sector.

The basic picture, then, is of a major expansion in global sugar production, concentrated both geographically and in the hands of a smaller number of corporations that operate vertically integrated global chains of production and distribution.

Brazil’s Sugar Boom

The trends in global sugar production bear down most heavily on Brazil. There, the sugar industry is increasingly concentrated in the hands of a few families, known in Brazil as the sugar barons, and a few foreign companies, typically acting in partnership with each other. With foreign investment flooding into Brazilian sugar – US$9 billion in ethanol alone in 2006 – the sugar barons have been consolidating their holdings and restructuring their companies in order to capture these inflows.

Some have even put their family businesses on to the Brazilian stock exchange. What often happens is that foreign investors buy up controlling interests or minority stakes, leaving the sugar barons to oversee the agricultural operations – although foreign investors are starting to take a more dominant role in both (see Box 2). Foreign-owned mills processed 12 per cent of Brazil’s sugar cane during 2007–8, up from less than 1 per cent at the beginning of the decade.

If the mills with foreign minority-ownership are included, this figure jumps to 23 per cent. [7] Today it is possible to discern just a few conglomerates – transnational networks of TNCs and sugar families – that control much of the industry. The main three are built around Cosan, Crystalsev and Copersucar, which, according to Maurílio Biagi Filho, the head of Crystalsev, own nearly a third of Brazil’s mills. [8]

With Brazil’s sugar boom, production has shifted from the north-east of the country to the centre–south, where the terrain is more suitable to mechanised production. Millions of hectares of the cerrado, a region of Brazil comparable to the Amazon for the richness of its biodiversity, have been cleared for new sugar cane production. [9]

The mills in this region now account for about 90 per cent of Brazil’s sugar output, with roughly 60 per cent of this converted into ethanol. [10] The area has become the power base of the industry and, with heavy support from President Lula’s government, the region’s politically connected sugar barons and their foreign partners have been easily able to push through their agendas for expansion – converting vast areas of agricultural and forests lands to sugar cane production in the process.

And while the global financial crisis has slowed things down, the World Bank’s International Finance Corporation, the Brazilian development bank (BNDES), and the Inter-American Development Bank have stepped in with funds to keep the expansion and consolidation on track. [11]

Several private investment funds with hundreds of millions of dollars have also recently been established to buy land in Brazil for conversion to sugar cane production, including the Radar Propriedades fund managed by Cosan, the Calyx fund managed by Louis Dreyfus and the BrasilAgro fund managed by Cresud, a company owned by Argentine soya baron Eduardo Elsztain. Not surprisingly, land conflicts are on the rise where sugar cane is expanding, as is the violence inflicted on those who dare to resist. [12]

The model of production pursued by the sugar conglomerates in Brazil is large-scale and vertically integrated. Three-quarters of the sugar cane land in the country is either owned or leased by the mills, and Brazil’s 60,000 independent growers, with farms of less than 150 hectares, account for just 27 per cent of national production. [13]

Labour conditions on the sugar plantations are notoriously brutal, and as the sugar companies have grown in power they have been able to extract more and more from their workers, who are generally paid by the amount of cane they cut. The average tonnage of cane cut per day in the São Paulo region has doubled from 5–6 tonnes in the 1980s to 10–12 tonnes today – which translates into an estimated 12,000 strikes of a machete per day. [14]

Since 2000, sugar cane cutters in this region have increased their productivity by 11.9 per cent, but the amount they are paid for the cane has increased only 9.8 per cent over the same period. [15] Every year some workers die from exhaustion, and forced labour remains widespread in the industry. The Comissão Pastoral da Terra reports that 2,164 workers were freed from forced labour on Brazil’s sugar plantations in 2008. [16]

The model of production is also increasingly industrial – relying on the machines, new cultivars, and chemical inputs supplied by agribusiness. The boom in sugar cane is a major reason why Brazil’s pesticide market increased fourfold between 1992 and 2006 to be worth over US$5 billion in 2007. [17] It is generating a huge new growth market for the foreign-owned companies that control Brazil’s tractor market too. [18]

For the sugar companies, mechanisation reduces the need for manual labour, freeing them in part from the demands of workers and the increasing international criticism of working conditions on Brazilian sugar plantations. It is also a way to avoid the common practice of burning fields before manual harvests, which weighs heavily on the argument for the environmental merits of Brazilian ethanol.

In fact, the “sustainability” criteria drawn up by EU ethanol importers and their Brazilian suppliers requires mechanisation and, in this direction, the Brazilian government introduced a Protocol in 2007 to eliminate the burning of fields on 20 per cent of sugar cane lands by 2010, and 100 per cent by 2020.

In short, then, the sugar expansion in Brazil is characterised by a high level of corporate control, rapid and massive land conversion and an industrial model of production, based on labour exploitation and the supply of modern machinery and inputs by agribusiness. [19]

Brazil may be the epicentre of the global boom in sugar cane production, but a number of other countries are also being sucked in, following the same agribusiness model. Indeed, Brazil has now become the leading proponent of sugar-cane-based ethanol on the international scene, supplying Brazilian finance, investment and technology to countries around the globe to engage in its production.

Monsanto Makes its Move into Brazilian Sugar and Beyond

A key part of the story of the expansion of Brazilian sugar production was the development of varieties suited to the centre–south region and to ethanol production. Most of these varieties were developed by the Centro de Tecnologia Canavieira (CTC), a semi-private institution that was controlled by Copersucar but is now owned by a collection of the country’s top sugar mills. CTC used to charge non-members royalties, but now denies any access to its varieties to those outside its structure, who account for over half the country’s sugar production. [20

A new player, however, recently emerged on the scene, which is eating into CTC’s dominant position. CanaVialis, the world’s largest private-sector sugar cane breeding company, was set up in 2003 by several former public breeders with financing from the Brazilian conglomerate Votorantim, along with a sister company, Allelyx, devoted to sugar cane biotechnology. Similar to the CTC, CanaVialis works for the major sugar companies, who contract it to develop varieties specifically for them.

CanaVialis recently signed a US$25 million deal with Cosan to set up 10 research stations and develop sugar cane varieties. It has also developed sugar cane varieties for Odebrecht’s sugar cane plantation in Angola. CanaVialis says that its varieties now cover at least 15 per cent of Brazil’s sugar cane area. In Brazil, then, sugar cane breeding has become a potentially profitable business, something which has yet to happen elsewhere.

The development was not lost on the world’s largest seed company, Monsanto. In 2007, it began a partnership with CanaVialis and Allelyx to develop varieties of sugar cane genetically modified for resistance to glyphosate (Roundup Ready). Then, at the end of 2008, it decided to buy out both companies for US$280 million, suddenly catapulting Monsanto into the position of the world’s largest sugar cane breeding company.

Monsanto is clear that its intention is to use CanaVialis’ network of corporate clients and its germplasm collection as the basis for a widespread introduction of GM sugar cane. Sugar cane, unlike soya, is perennial, and farmers typically replant only every five years or so – and then they use cuttings, not seeds.

So Monsanto plans to sell its varieties according to the CanaVialis model – working through contracts and partnerships with the major mills, who will use the varieties on their own plantations and through contract production with their suppliers. The same model could then easily be applied outside of Brazil. CanaVialis has already been doing varietal development in Angola and California, and Brazil’s centre–south sugar cane varieties are cultivated elsewhere in the world, including in Sudan by Kenana Sugar, the world’s largest integrated sugar company.

Part of Monsanto’s road to GM sugar cane is already being paved by Roundup Ready sugar beets. These were introduced in the US and Canada in 2008 and Monsanto has regulatory approval to export them to major markets such as the EU and Japan. Similar regulatory approvals could be given for Roundup Ready sugar cane since, in both cases, the refined product is said to be free of transgenic material.

This, at least, is what the proponents of GM sugar argue. In Australia, where both Dow and Syngenta are collaborating with leading public research institutes on GM sugar cane, the sugar industry has already formed a lobby group to facilitate the introduction of GM sugar cane – the Sugarcane Gene Technology Group, which is modelled on the GM sugar beet lobby group in the US. [21]

Deserts of GM Sugar Cane

As with all other GM crops introduced on the market so far, the looming first round of GM sugar cane will be modified for resistance to Monsanto’s glyphosate herbicide, Roundup. Just as with GM soya, the appeal of these GM sugar cane crops is that they simplify things for large-scale, industrial production. GM soya took off in Latin America because it made farming easy for agribusiness investors, concerned only with raking quick profits off large areas of fertile land. It will be exactly the same for GM sugar cane. The Roundup Ready trait makes controlling weeds a simple affair of dousing the fields every once in a while with glyphosate.

The environmental and health impacts of a GM sugar cane boom will also be severe. While Roundup Ready sugarcane might simplify herbicide applications, the experience of Roundup Ready soya in Latin America shows how it fosters an abusive use of pesticides. [24] Because the crops are genetically modified to tolerate high levels of glyphosate, fields are drenched with the stuff, often sprayed by planes, with complete disregard for the impact on surrounding communities.

During the approval process for its Roundup Ready sugar beet in the US, Monsanto successfully lobbied the US Environmental Protection Agency to increase by 5,000 per cent the glyphosate residues allowed on sugar beet roots. [25] Roundup (glyphosate) is a toxic herbicide that presents serious risks to human health, even at low levels. [26]

Moreover, Roundup Ready is likely to encourage the use of multiple herbicides. With sugar cane, the common practice of no-till farming under mechanised production often relies on glyphosate to destroy the remaining ratoon (stubble) when it is time for replanting. Since this practice will not be possible when the ratoon has tolerance to glyphosate, no-till with Roundup Ready sugar cane is likely to require additional herbicides.

The growing presence of glyphosate-tolerant weeds and Roundup Ready volunteers (maize and soya), especially in Latin America, will also force industrial operations growing Roundup Ready sugar cane to use additional herbicides. To deal with such problems with its soya, Monsanto says it will soon be introducing a Roundup Ready soya that is also resistant to the herbicide dicamba – so that both herbicides can be sprayed to ensure that any glyphosate-tolerant weeds are destroyed. [27]

Farm workers are often the worst affected by such pesticide practices. Jorge Chullén of the International Union of Food Workers says that the problem of pesticides for workers in sugar cane plantations has intensified in recent years, particularly because there is an increasing tendency for the mills to outsource the application of pesticides, among other field operations, to contractors, thus evading their responsibilities to their workers.

He describes the working conditions with these outsourcing operations as “horrible” and says that the practice is further deteriorating safety standards for workers. GM sugarcane could thus be a double blow to workers – increasing their exposure to pesticides and contributing to a process of mechanisation that wipes out jobs in the sector. [28]