Statement of Position on the Reform of the EU sugar market regime as per 1 October 2015
© Ingo Firley 2010
The proposals made by the European Commission dated 12 October 2011 for reform of the sugar market regime are very much welcomed by the German Committee of Industrial Users of Sugar (IZZ). This applies both to the abolition of the quota system as of 2015 as well as to the proposed safety net for sugar beet growers.
The secure supply of high-quality sugar at competitive and stable prices is the top priority for industrial sugar users. The changed circumstances on the world market and their impact on the EU must be taken into consideration by the sugar market reform.
The sugar quota system must be abolished by 2015 in order to ensure a free development of the market and prices. The quota system is currently proving to be a barrier to sufficient supplies. The quota meanwhile limits supplies of EU sugar to around 80% of the EU’s requirements. By contrast, enough sugar beet is available for bioethanol production. The EU Commission’s communication rightly says that "sugar quotas lost their relevance".
The future safety net for beet farmers will continue to exist by retaining a sufficient level of EU trade barriers and possibilities of intervention by the EU Commission in the event of market disruptions. In addition, the position of sugar beet growers vis-à-vis sugar industry companies will be secured by the mandatory closing of supply contracts.
More competition is required between sugar sector companies. The market has a high supply-side concentration. Sugar industry companies will also be required to compete harder for market shares and volumes of sugar sales. To generate more competition in the EU sugar market, the food industry needs an expansion of its procurement options. Bilateral trade agreements must also provide duty-free import quotas of fully refined white sugar for the food industry.
A reduction of the extremely high trade barriers is absolutely essential so as to bring greater pressure of competition to bear on the oligopolistic sugar industry supply structure within the EU and to enable industrial sugar users to unbureaucratically switch to imports from supplying third countries in times when the world market price rockets and a sugar shortage occurs within the EU.
The current tariff rate of Euro 419 per tonne plus variable tariff rate is unduly and disproportionately high. It still shores up the old intervention price of Euro 632 per tonne dating prior to 2006. The tariff rate must be quickly adjusted, with a sense of proportion, to the new EU reference price of Euro 404 per tonne. A reduced tariff rate would still leave domestic production secure - even if world market prices were particularly low.
A mandatory vendor declaration of origin in the case of sugar originating within the EU is required. Only sugar originating in the EU secures favourable preferential access to key third country markets for European processed products. The specification of origin is therefore necessary for German and European industrial sugar users. Future bilateral agreements should account for the fact that the EU has meanwhile become a net importer of sugar.
Despite record crops, there is a sugar shortage within the EU. A short-term response to bottlenecks within the EU is absolutely essential in the run-up to 2015 but this is not a reliable business basis for the sugar processing industry. In 2010/2011 the EU Commission was obliged to make a total of 1.35 m tonnes of sugar available to the food industry by way of emergency measures. Such emergency measures are also indispensable to balance out the deficit in 2011/2012.
A fixed market mechanism is supposed to enable duty-free direct procurement of fully refined white sugar by the sugar processing industry in the event of high world market prices so as to avoid disproportionately high EU prices caused by a bottleneck situation and the supply-side market structure. In the event of shortages, industrial sugar users must be able to respond appropriately to the market situation.
For more information on BDSI positions see
Bonn, 28 November 2011