The US Department of Agriculture has published its semi-annual report on the EU27 sugar sector. Published in October, the report highlights the enormous price volatility facing ACP exporters of sugar since November 2009. Particular volatility was apparent in both the raw sugar and white sugar markets from November 2010 to November 2011, with raw sugar prices fluctuating some 48.9% and white sugar prices fluctuating some 76% (the difference between the highest and lowest average monthly price over the period). For raw sugar prices, significant price volatility continued to be a feature of ACP sales from November 2011 to June 2012, but with far less volatility in white sugar prices.
From November 2011 to June 2012, prices paid for ACP raw sugar were on average 43% higher than the price paid for ACP sugar between November 2009 and June 2010, while prices paid for white sugar were on average 53% higher.
EU27 sugar imports from ACP countries: Quantities and average prices (CAF*) for raw and white sugar
|Raw sugar||White sugar|
|Tonnes||Ave price €/t||Tonnes||Ave price €/t|
|Nov 09 – Jan 10||423,866||397||10,485||526|
|Feb 10 – April 10||275,678||392||21,887||465|
|May 10 – July 10||226,822||387||79,026||432|
|Aug 10 – Oct 10||331,481||389||91,515||401|
|Nov 10 – Jan 11||325,576||398||105,274||457|
|Feb 11 – April 11||335,598||442||110,765||488|
|May 11 – July 11||249,510||451||103,510||585|
|Aug 11 – Oct 11||450,319||455||109,072||593|
|Nov 11 – Jan 12||335,299||531||77,521||726|
|Feb 12 – April 12||374,410||578||77,212||730|
|May 12 – June 12||147,887||570||43,721||715|
* Common Assessment Framework
Source: EC/EUROSTAT, cited in USDA report, p. 6
The USDA analysis notes that during marketing year 2011/12 EU sugar importers ‘were finding it difficult to secure adequate supplies’. As a consequence, the EC allowed the opening of seven tenders during MY 2011/12 for the importation of ‘an additional 399,000 tonnes of sugar, 385,000 tonnes of which were raw sugar for refining by EU refiners’. However, raw sugar was in such short supply that ‘EU full time refiners paid import duties between €290 and 312.6 per tonne’, a discount of between 7.8 and 14.5% compared to the ‘full EU import duty of €339/tonne’. According to USDA, ‘these costly sugar imports reflect troubles with the EU sugar market functioning, because the price after refining is significantly higher than the average EU price for domestic sugar.’ These special import tenders saw imports reach 3,800,000 tonnes in MY 2011/12.
For MY 2012/13, USDA forecasts a 10% decrease in EU sugar production ‘due to poor growing conditions’, although stocks carried over from MY 2011/12 (900,000 tonnes) will return EU stocks to historic levels. A further increase in imports to 3,900,000 tonnes is expected in MY 2012/13, although this could be higher, depending on when sugar trade flows commence under the recently concluded FTAs with Latin and Central American suppliers.
In 2011/12, EU sugar exports reached 2,400,000 tonnes following the carrying over of unused export licences from the 2010/11 WTO notification year. In MY 2012/13, EU sugar exports are projected to fall back to within the WTO ceiling of 1,500,000 tonnes.
With the gap between EU and world sugar prices closing, EU food processors (who use 70% of sugar consumed for food uses in the EU) are seeing their global competitiveness enhanced, and this is estimated to be raising EU domestic consumption of sugar to 18,000,000 tonnes in 2011/12 and 2012/13 (up from 17,800,000 in 2010/11).
The consequences of the sugar shortages and high tender prices for imported sugar provides the background to allegations by Tate & Lyle Sugars of EC ‘mismanagement’ of the EU sugar regime (see Agritrade article ‘ Tate & Lyle Sugars initiate further legal case against EC management...’, 25 November 2012). However, this period also corresponded with some of the highest prices being offered for both ACP raw and white sugar.
The market effects of increased EU sugar imports are thus determined not only by the volume of imports but also the basis for these imports and the world market price for sugar. This has important implications for how the EU manages the sugar regime in the coming years, as well as for the basis and nature of reforms up to 2020. In the coming years, the application of different import regimes could potentially complicate the marketing of ACP sugar into the EU, since on a month-by-month basis it could generate considerable uncertainty over the prices at which various types of sugar will be made available (particularly if imports are managed on an ad hoc basis under a tendering system, as occurred in 2011/12).