(Bloomberg) -- A new Intercontinental Exchange rule restricting the delivery of genetically modified cane sugar could restrict the flow of Brazilian supplies to the US.
Traders will be required to certify that the sugar being delivered under the US futures contract is “entirely from sugar cane varieties which have been developed by the traditional plant method of hybridization and selection,” according to a Dec. 6 statement from the exchange. The new rule comes after US companies expressed concerns over potentially receiving genetically modified supplies.
The requirement, which is slated to take effect in 2026, would likely have the biggest impact on top sugar producer Brazil, which approved the world’s first gene-edited variety in 2017 to resist a major crop pest.
The country is a key supplier to the US, which allows countries to ship a certain amount of sugar under low duties. Brazil is allocated the second-biggest share of that quota, and also ships sugar above that limit to the US under a higher tax rate.
To be sure, most of Brazil’s sugar is not genetically modified, according to a letter from ICE to the Commodity Futures Trading Commission. But “a recent combination of tight domestic sugar supplies and the relative values of domestic and world sugar have led to a sustained increase” in those so-called high-tier imports, prompting company concerns that deliveries under the futures contract could contain GMO sugar, according to the letter.
Some of the larger players in Brazil including Raizen SA have non-GMO certifications, and ICE’s rule does allow the recipient of sugar to waive the certificate requirement if desired. Still, the new exchange requirement could discourage further uptake of the gene-edited varieties, and add logistical complexity as the two kinds of sugar would need to be separated.
ICE declined to comment beyond the statement and letter.
--With assistance from Dayanne Sousa.
©2024 Bloomberg L.P.