EU Sugar Regime

The new EU Sugar market regime that came into force on 1 July 2006, and which will remain in effect until 30 September 2015, is of particular importance to AGRANA. The key aspects of the new regime are the gradual yet drastic reductions in EU sugar prices as well as the reduction of EU sugar production through the loss of exports outside the EU and preferential imports. The EU sugar quota will be cut by around one third, equivalent to approximately six million tonnes, to between 12 and 13 million tonnes during this period.

The new market regime also imposes severe restrictions on the export of EU quota sugar outside the Union and the re-export of ACP sugar (sugar from Africa, the Caribbean and the Pacific regions) under the Cotonou Agreement. As a result of the decision of the WTO panel on the issue, it is no longer possible to export quantities of C sugar in excess of the EU quota to the world market. 

Import duties levied on imports from Least Developed Countries (LDCs) have been cut by 20% since 1 July 2006. Although the volume of imports from LDCs has not yet risen significantly, the import duties are due to be completely lifted by 1 July 2009.

The purpose of the reform of the sugar market regime is the EU’s goal of employing a restructuring program in the period until the end of the 2009|10 marketing year to retire less competitive productive capacity within the Union and thereby increase the competitiveness of the European sugar industry vis-à-vis the world market. The aim is to reduce the sugar quotas by offering sugar refineries and sugar beet growers assistance from restructuring funds. This is being financed by a restructuring levy. Regions that largely discontinue sugar production will be compensated for retiring sugar refineries and lost crops through additional regional assistance.

Given the impending failure to reach the original targets set by the reform, the European Council of Agriculture Ministers decided on 26 September 2007 to accept the proposed reform of the sugar market regime put forward by the European Commission.

The key reforms were:

• The fixing of the compensation level for farmers at EUR 237.5 / tonne for returned quotas and 10% of the company compensation, and
• No restructuring levy for the 2007|08 marketing year on the preventative withdrawal for the return of at least these amounts (13.5 % for most countries, 6.21% for Hungary, 7.29% for the Czech Republic, 4.32% for Slovakia and 13.5% for Romania).
  

The overall aim of this latest reform is to restore the balance in the EU sugar market. In the event that these measures fail to lead to a significant return of sugar quotas, then the reform of the sugar market regime holds the threat of a lineal reduction in quotas from the 2010|11 marketing year which would apply across the board to all remaining sugar producers.