EU agrees to one-year cut in sugar production

By Anthony Fletcher

- Last updated on GMT

Related tags: Sugar, European union, European commission, Eu

The EC's proposal for a one-year cut of 2.5 million tonnes (13.6
per cent) in sugar, isoglucose and inulin syrup production has been
accepted.

The Commission has consistently argued that such a one-off reduction is necessary to ensure that the newly-reformed sugar regime gets underway without heavy surpluses undermining market balance.

"The Commission has made a positive move to normalise the sugar market situation in the EU faster, even if it means a lower quota production for sale in the next financial year,"​ said executive vice president Mogens Granborg.

"Although the reduction is bigger than expected, the financial implications will not cause a change in the expectations for the underlying operations as stated above."

The first marketing year under the reformed sugar regime could be very difficult because of possible oversupply of the market, due to limited export possibilities and the fact that in this first year, the effects of the Restructuring Fund will not yet be felt.

Following requests from a number of Member States to do so, the Commission proposed to reduce sugar production under quota in the first year of the reform by 2.5 million tonnes (13.6 perc ent) in order to relieve the pressure on the market.

This is designed to improve the balance on the sugar market without creating new stocks of sugar.

"This one-off cut in sugar production is vital to ensure that the newly-reformed sugar market gets off to a good start,"​ said Commissioner Fischer Boel last month.

"Unless we act, heavy surpluses will weigh on the market as the reform gets underway. This way, we can kick off our new system with the market in balance.

"I realise this decision will be difficult for some. That is why the reduction will take into account the special efforts undertaken by Member States giving up quotas for 2006/07."

The production cut will be divided up between the individual Member States according to a balanced weighting. Production will be reduced more for those countries that previously produced more sugar for export.

Special account will also be taken of those countries that undertake large reductions in quota in the first year of the reform through the newly-introduced Restructuring Fund.

The regulation agreed today also fixes transitional arrangements to take account of the fact that the first year of the new regime will last 15 months. This is so that, in future, the marketing year will run from 1 October to 30 September every year.

On February 20, EU agriculture ministers formally adopted a radical reform of the EU sugar sector. The reform, which will come into force on 1 July, will bring a system that has remained largely unchanged for almost 40 years into line with the rest of the reformed Common Agricultural Policy.

It is designed to ensure a long-term sustainable future for sugar production in the EU, enhance the competitiveness and market-orientation of the sector and strengthen the EU's position in the current round of world trade talks.

The key to the reform is a 36 per cent cut in the guaranteed minimum sugar price, generous compensation for farmers and, crucially, a Restructuring Fund as a carrot to encourage uncompetitive sugar producers to leave the industry.

Related topics: Commodities, Cocoa & Sugar, Ingredients

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