Romanian sugar producers face tough future

Related tags Sugar European union International trade Romania

Romanian sugar producers say they are facing possible collapse
because of suffocating sugar quotas which have been in place for
the last five years, in the run up to accession.

As producers await the decision on new agricultural quotas from Brussels, the industry heads says that they remain pessimistic that quotas will be upped to more workable levels.

Currently, around 85 per cent of all sugar requirements are imported, most of that coming from the EU. Total demand for sugar currently nudges the 500,000 ton mark - a figure which Romanian sugar producers say they can easily match with domestic resources.

Sugar producers say that the reason the domestic industry is not able to feed demand is because of low tariffs and the existence of tax-free imports to disadvantaged areas. This means that the domestic industry is not able to compete in price terms because of the relatively small size of its industry, compared to major EU players.

"Despite customs duties of 90 per cent on refined sugar and 45 per cent on raw sugar, imported sugar is still cheaper than the domestic product,"​ said Ioan Armean, head of the Bulgarian Sugar Employer's Association. "We think that the customs duties on imports of raw sugar should be raised from 45 per cent to 60 per cent."

The result is that many sugar producers are now struggling to stay afloat. Indeed, analysts believe that if the market continues in its current state, the domestic sugar market could face total collapse by 2007.

Brussels is to announce the latest farm quotas at the end of April, but sugar producers hold little hope that quotas will be raised to the sort of levels they would claim would be workable. The Romanian government was considering putting in a request to raise sugar quotas to 500,000 tons per year, but the consensus is that that figure was extremely optimistic.

"It would be an extraordinary thing if Romania would receive a quota of 300,000 tons of sugar,"​ said Farming Minister Ilie Sarbu.

In 2003 Romanian sugar processors refined a mere 75,000 tons of sugar, tracking the demise of a once booming industry. In 1989 the Romanian sugar industry comprised 33 sugar processing facilities; today there are just six that remain operational.

Romanian authorities want to ensure that its remaining sugar producers stay in business until 2007, which is the year of the country's mooted accession to the EU. Once in the EU, the sugar producers will be able to rely on significant subsidisation which could see the sector returning to a boom cycle.

Related topics Commodities Cocoa & Sugar