Hungary discusses renouncing half its sugar quota

By Laura Crowley

- Last updated on GMT

Related tags: European union, Hungary, Sugar, Eu

Talks are under way in Hungary aimed at returning 50 per cent of
the country's sugar quota to the restructuring fund, in light of
the latest sugar reforms announced by the European Union.

Sugar beet growers, the Ministry of Agriculture and the sugar industry have been meeting to discuss the plans that, with the associated compensation payments to farmers, are intended to safeguard the sugar beet supply for the remainder of the Hungarian quota. The move would lead to a pro rata reduction in the sugar quota held by both the Nordzucker subsidiary Matra Cukor, and the Agrana subsidiary Magyar Cukor. Given that the remaining volume of sugar available to Agrana will no longer suffice the economical use of two refineries, and subject to approval, Agrana intends to close its plant in Petohaza. Instead it will focus its activities at its Kaposvar facilities, in the attempt to make production as efficient as possible. The new EU sugar reforms came into force last year to improve competitiveness and market-orientation of the sugar sector and to guarantee its long term future. As part of the programme, financial incentives have been offered to the less competitive producers to leave the market. The goal is to remove about 6m tonnes of quota by 2010 to ensure balance on the market. So far however, only 2.2m tonnes have been withdrawn from the market, leading the EU to make new reforms in September to further encourage voluntary quota reduction. The amendments meant that the percentage of the aid given to growers and machinery contactors was fixed at 10 per cent, but growers who renounce the quota will get an additional payment. A new element introduced was that beet growers may apply directly for aid from the restructuring fund. Moreover sugar producers who sell that share will receive a refund of the restructuring levy. The Commission hopes the changes will help take some 3.8m tonnes of quota off the market. If insufficient quota has been renounced by 2010, the Commission will make compulsory quota cuts. Earlier this month, Danisco announced it would close its sugar production plant in Panevezys, Lithuania, as part of its attempt to reduce its overall quota to 967,000 tonnes from about 1.05m tonnes. In October, Tate & Lyle sold its Mexican sugar business, Grupo Industrial Azucarero de Occidente, amid measures to exit the sugar industry in the Americas and refocus on value-added ingredients.

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