EC may boost sugar supply after price hikes and complaints

By Mike Stones

- Last updated on GMT

Related tags Sugar European union International trade Eu

Not so Fab: Significant changes are necessary to improve the EU sugar sector, said Nestle and other firms.
Not so Fab: Significant changes are necessary to improve the EU sugar sector, said Nestle and other firms.
The European Commission will consider boosting the availability of sugar at its next tonnage tender meeting on August 25 after sharp rises in prices and calls from food manufacturers for it to increase sugar quotas or abandon them.

An EC spokesperson told “This problem has been on our radar since last October​.” Action could be taken to increase the supply of sugar at the next Management Committee adjudication on imports set for Thursday August 25. “If need be, we will do more​ (to increase the supply of sugar within Europe),” he added.

The EU had already responded to rising sugar prices by modifying its out-of-quota-sugar arrangements and allowing up to 500,000t of duty free sugar to be imported into the union since April, said the spokesman.

He attributed rising prices partly to lower-than-expected harvests in the key producing regions of Brazil and Australia. That was compounded by the diversion of sugar exports from emerging nations, normally imported into the EU duty-free, to the world market to benefit from higher prices.

The existing sugar quota regime runs until the end of September 2015 and the Commission will make proposals before then. “The Commissioner previously indicated that the issue may be taken within the context of the forthcoming CAP reform, proposals for which are due for publication on October 12​ (2011),” said the spokesman.

Sugar prices

Meanwhile, UK sugar prices have soared by 60% to reach up to €880/t this year compared with €500-550/t a year ago.

Earlier this week, food producers demanded EU help to mitigate the effect of spiralling prices.

James Lambert, ceo and executive chairman of R&R Ice Cream, Europe’s largest own-label ice cream manufacturer, told ”We are urging the EU to either increase quotas and/or allow food manufacturers to import sugar tariff-free from the world market.

“The price is increasing virtually daily and we have to get some stability back into the market. Across Europe, more than 80 sugar production factories have closed down since 2004 and vast EU subsidies paid to the owners. The region has since gone from being one of the world’s largest exporters of sugar to one of its largest importers​.”

Increasing quotas would bring about “a stable, efficient and economically viable sugar industry​”, said Lambert.

Without extra quota, the firm said it would be forced to buy sugar on the world market. But, with EU tariffs totalling €417/t, that would bring the price to about €1000/t.

Ethanol production

European sugar demand now exceeds supply by about 3 -4m tonnes, he estimated.

This year’s shortfall was caused by global demand rising at 2 percent/year, poor harvest prospects and rising consumption for ethanol production.

A spokesperson for the world’s biggest food producer, Nestle told the Financial Times: “Significant changes are required to bring sufficient transparency and fair conditions to the market. As such, the EU reform should phase out sugar production quota as of 2015.”

Andrew Kuyk, the UK Food and Drink Federation’s director of sustainability and competitiveness, told “It is not simply a question of lowering tariffs or increasing import quotas, though the EU Commission has taken action on both these fronts to increase supply by up to 1m tonnes in the last year​.”

Some EU Member States are reluctant to support short term action preferring to see if the situation improves when the new sugar year begins in October, he added.

“For the longer term, sugar will now be included in the CAP reform package expected in October, however it remains to be seen what will be proposed,” ​said Kuyk.

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