EU sugar supplies are at their most critical levels since the 2005 sugar reform and are causing ‘extreme volatility, instability and disruption’ to the European food and drink industry.
That’s the bleak assessment of the Committee of European Sugar Users (CIUS), whose sugar-using food and beverage members – the likes of Cadbury, Coca-Cola, Unilever and Ferrero – buy almost 70% of EU sugar consumed annually.
In a position paper for the forthcoming 2011-12 sugar marketing year, the CIUS said that current stocks remained too low to meet future demand over that period.
Meanwhile, reports of a ‘bumper’ sugar beet crop were little consolation, said the trade body, as “inflexible quota levels” currently restrict market access to EU stocks.
The CIUS said that immediate action was needed to give a clear signal to the market. “To create a stable and sustainable EU sugar market, the Commission needs to abolish production quota as soon as possible,” it said
EC’s inadequate planning
The sugar market was one of the EU’s most heavily regulated, said the CIUS, where it includes production, import and export quotas, a legal minimum price for beet growers and reference prices for raw and white sugar.
Severe EU supply shortages throughout 2010/11 were due to lower EU beet production and insufficient cane sugar imports from African, Caribbean and Pacific nations and other nations to meet EU demands.
“Poor market intelligence on actual sugar volume availability in the EU also led to inadequate planning and slow adoption of corrective measures,” by the EC and its Sugar Management Committee, the CIUS said.
The CIUS said it had repeatedly asked the Commission to take “decisive action” to cover market needs and maintain buffer stock levels, but that officials had acted too late.
“As a consequence, today the market remains extremely tight and EU sugar users continue to face significant sourcing difficulties.”
A deeper crisis could only be averted by ensuring end-of-season sugar stocks of 1.8m tonnes during the 2011/12 marketing year, the CIUS said.
The body also recommended that the EC used market instruments to balance supply and demand “as soon as possible”.
Despite bumper beet crop predications for 2011/12, the current quota system meant that the market shortages would not be addressed, the CIUS said.
Consequently, it recommended the release of at least 550,000 tonnes of out of quota sugar onto the domestic market by November.
Structural reform essential
The body also advised that tariff-rate quotas (TRQs) on at least 550,000 tonnes should be temporarily scrapped by December, while CXL import duty (applied to imports from the likes of Brazil and Australia) should be stopped by October 2011.
Martin Turton, manager of the UK Food and Drink Federation's biscuit, cake, chocolate and confectionery (BCCC) group, told BakeryandSnacks.com that he also thought the EC had implemented market balances too late, with UK sugar users facing "significant sourcing difficulties" that inhibited their domestic and overseas competiveness.
Ensuring supplies and guaranteeing 1.8m tonnes in buffer stocks for 2011/12 was a "short-term measure", Turton said, with "structural reform through deregulation of the market essential in the long-term".
Turton added: “Manufacturers are doing their best to mitigate the worst effects of rising costs through greater efficiency including reducing their use of energy, water and packaging, reformulating recipes, forward buying and hedging arrangements.
"But there are limits to what can be achieved by such actions. Unless there is an early return to more normal market conditions, some consumer price increases may follow.”