Brazil’s Organic Sugar Industry at Risk as Trump Ends Quota, Imposes Tariff

Donald Trump’s trade war is putting Brazil’s organic sugar industry at serious risk, as the sector is heavily dependent on the U.S. consumer market. The United States is the destination for roughly half of all organic sugar produced in Brazil.

In addition to a 50% tariff on Brazilian exports, Trump has announced the end of a 210,000-ton quota—established two decades ago—that allowed organic sugar to enter the U.S. tariff-free. Without that quota, exporters will now have to pay US$357 per ton, equivalent to a 48% tariff, according to industry estimates. Combined with the 50% “Brazil tariff,” organic sugar that previously qualified for duty-free entry may now face a total tariff of up to 98%.

Brazil has four companies that produce organic sugar: Native (part of the Balbo Group), Jalles Machado, Goiasa, and Adecoagro. Together, they have a production capacity of 280,000 tons. Last year, they exported 140,000 tons to the U.S.

This dependency, however, is mutual. The U.S. imports all of the organic sugar it consumes, and last year Brazil accounted for 46% of total imports, followed by Colombia with 85,000 tons, Argentina with 51,000 tons, and Paraguay with 28,000 tons.

The U.S. consumes about 300,000 tons of organic sugar per year—more than half of global consumption, which stands at 580,000 tons annually. Brazilian organic sugar is used in over 100 product categories that reach American consumers.

Reminiscent of Europe

Brazil once exported organic sugar to Europe but lost market share on the continent after the European Union signed a free trade agreement with Colombia, Peru, and Ecuador. The deal allowed Colombian organic sugar to enter the bloc tariff-free. Meanwhile, Brazil still faces a €414-per-ton tariff to access the European market, making that trade route unviable.

“If the U.S. 50% tariff goes into effect, we risk seeing a repeat of what happened to Brazilian organic sugar in Europe,” warns Plinio Nastari of the consultancy firm Datagro.

In Europe, even without paying tariffs, Colombian organic sugar is sold at prices 30% higher than Brazilian sugar—and still manages to be more competitive. That edge has allowed Colombia to steadily ramp up production.

Brazilian Production

In Brazil’s organic sugar sector, there’s a prevailing sense of desperation and injustice. After all, it was Brazilian producers who helped develop the organic markets in today’s consumer countries. Leontino Balbo, a partner at the Balbo Group, recalls how, 30 years ago, American companies approached them to establish long-term supply relationships.

U.S. companies began presenting their annual organic sugar demand projections to the mills, allowing producers to adapt and develop their own production growth programs. The market created a system in which production is made to order—unlike the commodity market, where production responds to price.

“Thirty years ago, we had clients demanding 300 tons a year. Today, that same client demands 8,000 tons. There are companies that increase their orders by 1,000 tons every year. There’s no global surplus to cover that,” Balbo explains.

Unlike the commodity sugar market, organic sugar trades are governed by production certifications, which vary by consumer market and impose high compliance costs. Each country has its own certification standard, requiring producers to adapt processes every time they enter a new market. “There’s no such thing as a universal certification,” says Balbo.

To meet these standards, Brazilian mills had to overhaul their operations—not only in the fields but also in their industrial processes. In addition to switching to large-scale cane cultivation using only bio-inputs and no chemicals, production facilities had to be modified. For example, factories cannot use chemical agents, making processes slower, and metal components have to be replaced with stainless steel parts. At Usina São Francisco (owned by Native), a specialized packing system was installed to package sugar according to the requirements of customers in each of the 74 countries it serves.

No Alternative

According to Nastari, there are no viable alternatives—domestic or international—for Brazil’s organic sugar. “It’s a niche market that depends on consumers who value organic products. In Asia, demand is still inconsistent, and in Africa, it’s virtually nonexistent.”

Domestic demand is “relatively small,” he adds. Sales of organic sugar in Brazil are around 12,000 tons per year, or about 0.2% of total national sugar consumption. According to Balbo, Brazilian food manufacturers have shown no interest in using organic sugar.

In recent months, the average selling price of organic sugar has risen alongside global demand, while conventional sugar prices have fallen. As a result, the usual 30%–35% “organic premium” has increased to 50%.

However, Balbo says a surge in domestic supply wouldn’t drive prices down for long. For organic sugar prices to be “accessible” in Brazil, he argues, exports to the U.S.—which are more profitable—must continue. “Those exports help cover my fixed costs, certification costs, operational expenses, and financial overhead. If I can’t sell 40,000 tons per year to the U.S., I can’t sustain my cost structure, and I can’t remain in business,” he asserts.

According to Balbo, U.S. clients will still need to buy Brazilian organic sugar in the short term because local inventories are “very low” and other producing countries are not yet in harvest. But if the tariff stays in place, he fears that organic sugar production may have to be halted within “five to six months.”

He says that Usina São Francisco cannot simply “flip a switch” and shift to conventional sugar production, given its cost structure. The facility currently employs 2,000 workers—twice as many as a conventional sugar mill.

Source: Globo Rural

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