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How will the end of EU sugar quotas impact confectioners?

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By Oliver Nieburg+

Last updated on 12-Jan-2017 at 12:45 GMT2017-01-12T12:45:42Z

EU sugar beet area expected to rise 7% in first marketing year after the sugar quotas, says Stratégie Grains. ©iStock/KevinAlexanderGeorge
EU sugar beet area expected to rise 7% in first marketing year after the sugar quotas, says Stratégie Grains. ©iStock/KevinAlexanderGeorge

Confectionery manufacturers can expect an increased supply of sugar at reduced prices once the European Union lifts sugar production quotas later this year.

Market research firm Stratégie Grains - which recently published a report on the expected impacts - projects EU white sugar production will climb 31% from 2016 to 2021, while it anticipates prices will drop.

EU sugar production quotas will be scrapped from October 1, 2017.

The decision was reached under 2013 Common Agricultural Policy (CAP) reforms amid warnings from the European confectionery association CAOBISCO that supply constraints for EU sugar had forced small companies to pay high tariffs to import cane sugar from outside the EU, harming their competitiveness.

Quota system

Limits on EU sugar production began in 1968 with the first Common Agricultural Policy (CAP) rules on sugar. Member states and the European Parliament agreed to abolish production quotas from the 2016/17 marketing year as part of the 2013 CAP reforms.

‘Good news for sugar users’

Madeleine Breguet, oilseed and sugar market analyst at Stratégie Grains, told ConfectioneryNews: "There will be an increase of sugar beet production, so there will be very strong competition on the supply side, so that's good news for all the sugar users."

The EU sugar beet area is expected to grow 7% in 2017/18 year-on-year, and by 14% by 2021/22.

France and Germany, and to a lesser extent Poland, are set to be the biggest contributors to the increased production area.

Production and prices

Stratégie Grains forecasts around 2m metric tons (MT) more sugar will be produced in the EU in 2017/18, compared to the prior year, reaching 18m MT.

"If sugar prices stay attractive, it can reach almost 21m MT in 2021/22," said Breguet. "We forecast that the price will remain quite attractive.”

The market analyst anticipates EU white sugar prices will be above €500 per MT in 2017/18 and between €445 and €490 per MT during the following years up to 2021/22.

World white sugar prices are expected stand at around $600 per MT in 2016/17 and $585 per MT in 2017/18, falling to around $525 per MT by 2021/22, it projects.

Imports and exports

Sugar imports are expected to decrease gradually after the end of the EU quotas, according to Stratégie Grains.

Non-profit organization Bonsucro previously warned impoverished cane sugar producers in the developing world could be side-lined post-EU sugar quotas as EU confectioners may rely almost solely on cheaper domestic beet sugar.

The EU is also expected to export more sugar and, according to Stratégie Grains report, “should have no problem finding buyers on the world market”.

The report anticipates North Africa and the Middle East will be favored destinations for additional exports.

Sugar consumption

Stratégie Grains expects annual sugar consumption in the EU will grow to 19.65 MT in 2017/18, up 2.3% compared to 2015/16 as increased consumption in some Central and Eastern nations offsets declines in Western markets.

However, it projects a fall in consumption in the subsequent years to reach 19 MT by 2021/22.  The market analyst says isoglucose could be an attractive alternative, particularly in liquid applications for the beverage and dairy industries.

Production quotas for the sweetener isoglucose – derived from wheat or maize starch – will also be abolished in the EU from October this year.

Stratégie Grains
‘End of sugar quotas: what are the expected impacts on EU and world sugar markets (2017-2022)?’

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