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EU sugar reforms leave east in the cold, claims expert

By Neil Merrett , 08-Dec-2006

Central and Eastern European sugar processors are bearing the brunt of new EU reforms due to dominant Western European companies within the industry acting in a political and not economic manner, claims an agricultural expert.

Tomáš Petana from the Czech Agrarian Chamber (AK) told Cee-Foodindustry.com that he believes that the new reforms, designed to lower sugar production throughout the bloc, are being focused predominantly on processors in Central and Eastern European countries like Slovakia and the Czech Republic.

He stressed that larger sugar producers were more concerned with protecting the industry in Western Europe, then ensuring the market remains competitive throughout the entire EU.

 

He pointed to the dominance of producers like Tate and Lyle, and Suedzucker for the discrepancy, which he feels is hurting the sugar industry in the region.

 

"Because the major owners come from Germany, France and Britain, the reforms will not benefit newer member states in Central and Eastern Europe," said Petana.

 

The claims follow the publishing of a report by the AK, which suggests that Tate and Lyle and Suedzucker - who jointly own processor Eastern Sugar processor - were dishonest regarding their reasons for phasing out production in their Central European operations.

 

Earlier this year, it was announced that the companies would be renouncing the quotas assigned to Eastern Sugar by selling it back to the EU.

 

This would effectively see an end to the company's entire operations within the Czech Republic, Hungary, and Slovakia.

 

The company blamed the decision on the diminishing profitability of operating in the region, which will continue to decline as the reforms take hold.

 

With the AK report claiming that the Eastern Sugar's Czech refineries alone generated more €2m of profit in the first quarter of this year, Petana questions the notion that the demise of the company was driven by economics.

 

"The plans to close Eastern Sugar are definitely a political decision," he said. "Even if they have to close the plants, they didn't need to cancel production within the country, as they could have sold their quotas to another processor operating in the region."

 

By selling their production quotas for Eastern Sugar back to the EU, he added that they were protecting segments of their operations in Western Europe at the expense of the entire industry in the Czech Republic.

 

"The reforms were meant to lower sugar production by around 5m tons by 2008, forcing all producers to lower their quotas. It appears however that the larger processor's have simply decided to close whole regions instead to protect their more established operations," said Petana.

 

"Sugar beet growing in regions like the Czech Republic is highly profitable for growers and processors due to high yield, so production in the region is certainly viable," he added.

 

Though unable to comment on the reports, a source connected to Eastern Sugar explained that the company remained concerned at the prospect of diminishing returns due to sugar reforms in the region and stood by its decision to renounce production there.

 

The source highlighted the comments made by Stanley Musesengwa, chief operating officer of Tate & Lyle during the original announcement in October this year."The business will inevitably face significant further pressure as the progressively negative impacts of reform of the sugar regime take effect on Eastern Sugar over the next three years," said Musesengwa.

 

"Eastern Sugar would also remain exposed to the possibility of further quota cuts being imposed by the EU across the industry in the event that the voluntary surrender of quota is not successful in obtaining a balance of supply and demand in the EU sweetener market," he added.

 

By selling back their quotas from their Czech operations to the EU, Tate and Lyle and Suedzucker are estimated to make €205m between them.

 

It is thought that around 30 per cent of this figure will go to producers and beet growers in the country as compensation agreed during negotiations with staff and producers who worked with Eastern Sugar.

 

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