EC defends flash boosts to sugar quotas

By Sarah Hills

- Last updated on GMT

Related tags European commission European union Eu

The European Commission has defended its decision to release thousands of tonnes of sugar on to the market after accusations that the move would have a detrimental impact on the yeast industry.

The commission was criticised by the Confederation of EU Yeast Producers (COFALEC) for recently taking 500,000 tonnes of industrial (out-of-quota) sugar -typically used by EU yeast suppliers - and releasing it on to the in-quota market. Then allowing an additional 700, 000 tonnes of sugar to be exported on to the world market, which the COFALEC claimed undermined its competitiveness.

In response the Commission has now told that its sugar policy decision is expected to lead to a larger area sown to sugar beet, potentially boosting supply.

It also said its actions took into account the traditional supply needs of the chemical, pharmaceutical and yeast industry.

Johan Reyniers, spokesman for the EC’s office for Agriculture and Rural Development, said: “The 2010/11 tense supply situation on the "quota" sugar market urged the Commission for actions.

“The quantities which have been released on the EU sugar market would otherwise have been carried forward to the next marketing year or exported.

“In any case, the Chemical/pharmaceuitical/yeast industry has a permanent, exclusive access to a duty free TRQ (tariff rate quota) of 0.4 miot.

“If needed, the Commission already expressed its willingness to increase the quantities. Access to sugar at world market prices for the Chemical/pharmaceuitical/yeast industry is therefore ensured.”

He added that the decision to allow out-of-quota exports in 2011/12 was taken to “give a clear (legal) perspective for the beet growers that their out-of-quota production will find an outlet next year.”

Reyniers said: “We are confident that this will lead to increased area.”

Industrial sugar is used to grow and ferment yeast, representing 25 to 33 per cent of production costs for yeast suppliers. Any change in competitiveness could have a knock-on affect for buyers within the food industry using yeast, such as bakers, wine markers and brewers among others.

Similarly, rapidly rising world sugar prices and bad weather, speculative hedging on supplies and stockpiling across the world have combined to leave confectionery manufacturers and the wider food industry worrying about sugar supply problems.

However, the global sugar market is expected to move into surplus during the 2011/12 cycle following three years of declining stock, according to analysts at the sugar broker Czarnikow, which has just released a report on the global sugar market.

Commenting on the EU, Czarnikow said that based on expected area figures and yield forecasts, it estimates that EU sugar production will increase by nearly 2m mtrv (metric tonne raw value) to around 17.4m mtrv for 2011/12, excluding the production of ethanol.

It added: “This marketing year, supply is still perceived to be tight, necessitating further market intervention from the EU Commission.”

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