Structural changes in the sugar market and implications for sugarcane smallholders in developing countries
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World sugar has experienced a number of trade and policy changes. Their impact on the sugar sector and stakeholders in developing countries has yet to be fully understood. For developing countries such as Ethiopia and the United Republic of Tanzania, which have the potential to expand sugar production and exports, understanding the impact of current and prospective trends in the world sugar market on the income and wages of smallholders and workers can provide useful insights into the contributi on of the sugar sub-sector to development goals. This paper employs econometrics and simulation techniques on household survey data to analyze the effect of a set of policy and market scenarios on employment and income of stakeholders (smallholders, workers) in the sugar sub-sectors of Ethiopia and the United Republic of Tanzania. The study reviews the current state of the world sugar market, discusses the likely impacts of various market and trade policy scenarios, and identifies the linkages b etween the macro level changes and earnings of small stakeholders. The key findings are that changes in international markets have limited effects on smallholders’ income, mainly because of the low supply response of smallholders in the face of relatively high elastic global supply. The increase in border price of sugar is beneficial to small farmers if the opportunity cost of land is low, or if domestic agricultural prices become more flexible.