EU sugar reform: producers cautious, users frustrated

By Anthony Fletcher

- Last updated on GMT

Related tags Sugar European union

The EU is confident that the sugar reforms announced last week give
producers a long-term competitive future, though firms such as Tate
& Lyle remain cautious.

The UK sugar giant said that the final decision to make the cut in the sugar reference price of 36 per cent was welcome, but that the firm remained concerned about the future of its businesses.

"Tate & Lyle has a world class competitive refining business and is not afraid of competition,"​ said chief executive Iain Ferguson.

"However, as we have always said, the regulatory playing field needs to be level. We remain concerned about the long-term equity between beet and cane and the difficulties faced by our isoglucose business in the absence of transferable quotas."

Nonetheless, the reform, which fixes the economic and legal framework for the European sugar sector until 2014/2015, has been generally seen as a compromise that favours EU sugar producers at the expense of users.

First, there was the climb-down from the original proposed 39 per cent price cut to a figure of 36 per cent, and most significantly for sugar producers, there was agreement the sector would be compensated for, on average, 64.2 per cent of this price cut.

This price cut is also coupled with a generous four year restructuring fund. This scheme for EU sugar factories, and isoglucose and inulin syrup producers, consists of a payment to encourage factory closure to encourage less competitive producers to leave the sector.

This payment will be 730 euros per tonne in years one and two, falling to 625 in year three, and 520 in the final year.

"This agreement will give the EU sugar sector a viable and competitive future,"​ said Mariann Fischer Boel, Commissioner for Agriculture and Rural Development.

"Acting now means we have the funds available to ease the painful restructuring of the sector that is an absolute must, and to compensate farmers. This deal offers the sector long-term certainty."

Indeed, Spanish food group Ebro Puleva said in a statement that the deal looked especially positive for farmers, both those that decide to continue beet production and those who stop, who will receive considerable compensation.

This has frustrated sugar users, who point out that European sugar is still twice as expensive as world prices. Richard Laming of the UK Industrial Sugar Users Group for example has criticised the reform for bending over backwards to accommodate sugar producers to the detriment of real reform.

He argued that the reduction in the price cut was made simply in order to create more money for compensation for those forced to leave the sugar industry.

"This deal takes the easy way out by simply dumping increased compensation costs on consumers and industrial users,"​ he told FoodNavigator.

"These costs will be paid for in the end by higher prices and lost jobs."

It is likely that sugar users will seek to drive for further reform in order to lower prices and open up the European market to greater competition. But for its part, the Commission believes that the deal is already a major step towards the achievement of this goal, while ensuring that adequate compensation is in place for business likely to lose out.

"It will not cost a single cent extra in public money,"​ said Boel.

The agreement means that the sugar sector will come into line with the CAP reforms of 2003 and 2004. Based on the Council's decision, the Commission will now start preparing the legal text and the provisions that will be effective in the transition to the new sugar regime.

Only when that has been finalised and the European Parliament has given its opinion about the sugar reform in January 2006, can the Council adopt the sugar regime in its final form.

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