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EC announces temporary measures to boost sugar supplies

16 December 2012

On 8 November 2012, according to the summary record published by the Commission, the EC agricultural management committee discussed the EU sugar market. It noted the growing gap between EU and world market sugar prices and the likely 25% reduction in EU sugar stocks by the end of marketing year (MY) 2012/13 (down from 2 million to 1.5 million tonnes). Against this background, the EC announced its intention ‘to allow 1.2 million tonnes of additional sugar on the internal market’, drawn from out-of-quota production and imports. These measures are expected to enter into force on 1 January 2013. The announcement paralleled moves in 2011 ‘when high world prices restricted EU imports and led to sugar shortages in several member states’.

An EU news and policy website, EurActiv.com, adds that the EC is to approve additional exports of 700,000 tonnes of out-of-quota sugar in MY 2012/13, taking total exports to 1.35 million tonnes, an amount within the WTO ceiling of 1.37 million tonnes.

The EU farmers’ organisation Copa-Cogeca has called on MEPs to ‘reject any new concessions which increase access for imports of raw cane sugar on the EU market’. In a press release, Copa-Cogeca called for the establishment of an automatic mechanism to ‘put out-of-quota sugar on the market when it needs it to maintain market balance’, and reiterated its call for the extension of production quotas until 2020.

According to the EC’s ‘commodity price data dashboard’ published in October, in August 2012 EU white sugar prices (monthly average) rose declined to €713/tonne, up 0.7% on July. In contrast, world white sugar prices for August 2012 fell by 2% from July to US$564/tonne (approx. €448/tonne at the time), taking world prices to 20.4% below the level prevailing in August 2011. In September, EU white sugar prices fell back 0.7%, while world market prices rose 0.4%, suggesting a continuation of these contrasting prices trends, although with a narrowing gap. This left EU white sugar prices 23.8% above the level of September 2011, while world market prices were 17.9% lower than in September 2011. 

Editorial comment

The broadening out beyond traditional refiners of the right to import raw sugar, coupled with investments by beet refiners in new refining capacity of 1.85 million tonnes, has seen an intensification of competition for raw cane sugar supplies within the EU. This has led to allegations that traditional refiners are being systematically discriminated against in the management of the EU sugar regime (see Agritrade article ‘ Industrial users set out their views on sugar reform against backdrop of...’, 9 September 2012).

Meanwhile, while industrial users can procure as much sugar as required on the world market (i.e. from non-preferred supplies), high import duties are levied, raising the costs for industrial users that have no access to preferential supplies.

This has thrown up awkward competition issues, as some refiners and value-added processors have been able to secure better access to preferential sugar imports than other refiners and industrial users. The new measures proposed by the EC to increase sugar supplies to the EU market are designed to address this problem, while more fundamental reforms are under consideration.

Whether these problems will be addressed will depend on how the new import arrangements are managed. An analysis published by USDA in October 2012 pointed out that the tendering arrangements used for new tariff-rate quota imports in MY 2011/12 led to full-time refiners paying duties of between €290 and €312.6 per tonne, a discount of only 7.8–14.5% on the ‘full EU import duty of €339/tonne’. The high prices paid by full-time refiners for these imports meant that the cost of the white sugar produced was significantly higher than the average EU price of domestically produced sugar.

While this was bad news for traditional EU sugar refiners, it did serve to support prices paid for ACP sugar, with the average price paid for ACP raw sugar between January and June 2012 nearly 17% higher than the 6-month average to the end of December 2011. How the new arrangements are managed is thus likely to have an important bearing on the raw sugar prices that ACP exporters can negotiate, particularly given the current wide discrepancy in EU and world market prices for white sugar.

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