In December 2013, the Executive Chairman of the Fiji Sugar Corporation (FSC), Abdul Khan, confirmed that the EU will remain a key market for Fiji’s sugar exports. He argued that despite the scheduled abolition of EU sugar beet production quotas from October 2017, world sugar prices remained “significantly lower than the EU price” offered for Fijian sugar. For this reason, he maintained that it was “difficult to conclude any sale other than with EU buyers”.
Mr Khan acknowledged that EU and world market prices “will get a lot closer” in the coming years. Nevertheless, he maintained that Fiji and other ACP suppliers “will still have the advantage of duty-free access which could still help with getting a premium price” on the EU market.
Between 2009/10, when a new EU import licensing regime was set in place, and 2011/12, Fiji maintained its traditional trade relationship with UK sugar refiners, and Guyana, Belize and Barbados largely maintained a similar, exclusive relationship with countries where traditional cane sugar refiners are located.
Under the Lomé sugar arrangement, import licences were restricted to seven traditional refiners in four countries. However, since the introduction in 2009/10 of a new legal framework for imports, ACP countries have been supplying sugar to no fewer than 18 EU member states. Some traditional ACP sugar exporters, including some of the most competitive suppliers, have diversified their trading partners beyond traditional EU raw cane sugar refiners.
According to EC analysis in May 2013, “as of the 2011/12 marketing year, sugar prices were negotiated in this new economic environment and the sugar producers managed to negotiate much higher sugar prices for the EU market.” Indeed, “during the year 2012 the EU price increased uninterruptedly, reaching the high level of €738 per tonne in January 2013.”
At the beginning of January 2014, however, it was announced that a Chinese delegation was visiting Fiji to discuss the sale of Chinese equipment to “improve productivity and harvesting” of sugar cane, a possible refinery joint venture and the scope for purchasing 100,000 tonnes of sugar in the medium term. According to Mr Khan, “based on the fact that China pays up to US$830 [€606] per tonne for refined sugar, raw sugar sales to China from Fiji could be viable.” It was recognised that more detailed consultations were needed, but the visit was described by a ministry official as timely, in view of the end of EU production quotas in 2017.
The situation facing ACP sugar exporters on the EU market is continuing to evolve. Price guarantees for ACP sugar have been abandoned, with prices being determined by the functioning of the “managed” EU market. This process of EU market management has not always run smoothly, with special market measures being periodically required. Between October 2012 and October 2013 this led to average EU sugar prices that were between 31 and 51.7% higher than world market prices. It also saw considerable variation in individual contract prices for ACP sugar, with exports taking place either under long-term contracts or via spot purchases.
ACP sugar exporters now supply both full-time cane sugar refiners and beet-sugar-based co-refiners who, it is argued, enjoy important cost advantages over traditional refiners (see Agritrade article ‘ EU co-refiners enjoy cost advantages’, 28 May 2012). With 1.85 million tonnes of new refining capacity installed since the initiation of EU sugar reforms, competition for raw sugar supplies from co-refiners has created financial difficulties for traditional cane sugar refiners (see Agritrade article ‘ Tate & Lyle Sugars argues for improved access to low-cost non-ACP ca...’, 3 June 2013).
Further reforms involving the abolition of EU sugar production quotas will increase the beet volumes available for use in sugar production by competitive beet refiners, reducing the need for imported sugar. Demand for imported sugar will also be affected by substitution of isoglucose and other sweeteners in certain existing components of the EU sugar market.
European companies will only be interested in partnerships with ACP suppliers if “the imported sugar volumes strengthen the company’s European market position”, as noted in Südzucker’s 2012/13 annual report.
Against this background, regarding Fiji’s future position in the EU sugar market, questions arise as to:
- the types of sugar products that Fiji should be supplying to the EU market in future;
- the refiners/importers to which Fiji should be supplying;
- the type of partnership that FSC should be seeking to establish with European importers/refiners.
While China is an obvious market for both raw and value-added Fijian sugar products, a review of the experience elsewhere of Chinese investment in the sugar sector could well prove of value (see Agritrade article ‘ Difficulties faced in Pan Caribbean’s Jamaican operations’, 21 October 2013).