EC proposes new incentives to sugar-addicted producers

By Jess Halliday

- Last updated on GMT

Related tags: Sugar, European union

The European Commission has proposed new incentives to encourage
sugar producers who will be uncompetitive at new lower prices under
the recent restructuring spur to leave the sector.

Restructuring of the Common Agricultural Organisation (CMO) for sugar took place in 2006. It aimed to remove around four million tonnes of sugar from the marketplace, after there was a four-year transition phase to make the industry more competitive. Measures included a 36 per cent price cut, payment of decoupled aid to farmers, and a restructuring fund financed by sugar producers. However while 1.5 tonnes of sugar were renounced by producers in the first year, only 0.7m tonnes were renounced in the second year - way below the five million tonnes required to balance the market and expected by the architects of the plan. Part of the difficultly in persuading producers to give up their sugar has been the uncertainty surrounding the amount of aid they would actually receive. Presently the amount of aid given to farmers can be set above the 10 per cent minimum by member states. Another reason for the difficulty has been that the effects of the price cuts have not yet fully filtered through to processors - and even less so to growers. Under the proposed changes, aid for growers and machinery contractors will be fixed at 10 per cent, and a special top-up will be payable to growers retroactively. In 2008/9, this top-up will be at the level of €237.5 per tonne. Moreover, the changes allow for beet growers to ask directly to reduce their quotas - up to 10 per cent of factory quota. For marketing year 2009/10, the withdrawal scheme will be revised so as to allow decisions to be made before sowing. Post-sowing, a further withdrawal is possible in October, with lower levels for those states whose quota has already been renounced. This will not reduce traditional supply needs for refiners, the Commission has said. "We need to reduce our sugar output dramatically if we are to give the sector in Europe a sustainable future,"​ said agriculture and rural development commissioner Mariann Fischer Boel. It is hoped that the changes will prompt around 3.8 m tonnes of sugar to be renounced, in addition to the 2.2 m tonnes already gone. If more still needs to be cut by 2010, the Commission proposes that compulsory cuts for each EU member state will take into consideration each state's success in reducing its national quota under the restructuring scheme thus far. "The restructuring fund is a key element of our reform, offering financial incentives to factories that can't compete at the lower price introduced by the reform,"​ added Ficher Boel She is positive the changes put forward this week will encourage more companies to give up quota. "I urge them to take this chance. As the price falls, life will get tougher. And after 2010, there won't be any money to help producers who have to bow out." ​ It is hoped that the proposed changes will be adopted by the European council and parliament by October at the latest.

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