White sugar prices hit a record in Indonesia last summer and further spikes are expected this year even though the world is awash with the sweetener. The main cause, say critics, is a small group of traders known in the industry as sugar samurai.There is no evidence the samurai are doing anything illegal but they buy most of the crop through an auction system that works in their favor, say the critics, who include industry officials, government advisers and other traders. Some of the purported samurai firms deny the auctions are unfair.
The system, which some samurai helped establish, gives them the right to buy sugar at the expense of other traders under certain conditions. The samurai also run most distribution and retail networks, giving them almost total control over the market and the retail price of sugar, the critics add.
That has made it virtually impossible for foreign commodity firms or other local players to enter one of Southeast Asia's largest white sugar markets, said Indonesia's commission for the supervision of business competition, an independent body that looks into unfair and monopolistic business practices.
Three major foreign commodity companies told Reuters the system made the market unattractive, even though they would like to trade white sugar. They all declined to be identified.
Nearly all global commodity players operate in Indonesia, home to 240 million people, a fast-growing economy and a market rich in palm oil, coffee and cocoa, as well as sugar.
"Why is it possible to fix the price and put the price very high -- because we don't have any other competitors," Hermanto Siregar, an agricultural economist and economic adviser to President Susilo Bambang Yudhoyono, told Reuters.
To be sure, sugar prices are also high in Indonesia because the government sets a floor price at auction to ensure farmers don't switch crops. Many traders complain that is too high.
But the dominance of the samurai, rarely reported before, is becoming more noticeable as sugar consumption steadily rises, critics say.
"They are so powerful," said Nawir Messi, chairman of the business competition commission.
Other traders put the number of samurai at around nine. They head unlisted family-run sugar trading firms that have been in business for decades. The firms are little known outside the sugar industry in Indonesia.
Reuters spoke to five of them. They denied having a grip on the market. Several said the term, sugar samurai, did not exist. Other traders Reuters spoke to used the nickname frequently.
"No one is cornering the domestic sugar market," said Ridwan Tandiawan, owner and CEO of a sugar firm called UD Benteng Baru. "Everything is transparent, the sugar price is determined through a fair auction."
Pieko Njotosetiadi of PT Fajar Mulia Transindo echoed those comments. "Everyone can take part in the auction," he said.
The samurai are involved in the white, or processed, sugar market, which is for households and small-scale firms. Indonesia is also the world's largest importer of raw sugar, which goes to refineries and then large-scale industries such as food and beverage manufacturers.
Indonesians eat more sugar than most Asians, at 22.9 kg (50.5 pounds) per head last year versus an Asia average of 17.5 kg (38.5 pounds), says the International Sugar Organization.
It also costs them more. For example, Indonesians pay nearly 60 percent more for white sugar than consumers in Thailand, another producer. Meanwhile, global sugar stocks are set to rise this year to their highest level in 5 years.
