04/15/2008
Second wave of 2008|09 sugar quota returns under EU sugar market reform successful

From AGRANA’s (Central Europe’s leading sugar producer) point of view, the current second wave of sugar quota returns under the EU sugar market reform has proven successful.

Europe’s sugar producers were able to return a second wave of quotas for the 2008|09 marketing year until  March 31, 2008. These quotas returns were subject to compensation amounting to €625 per tonne of sugar in the event of refinery closures (of which 90% will be allocated to the sugar producer and 10% to the beet grower) and around €220 per tonne for the non-closure of refineries (90% for the sugar producer and 10% for the beet grower) in addition to €237 per tonne for sugar beet growers. The precondition for claiming this compensation was that the return of quotas in the first wave up to January 31, 2008 was at least equivalent to the flexible preventive withdrawal in the previous marketing year.

The result, returns in the previous marketing year (2.2 million tonnes), the first wave (2.5 million tonnes) and, now, the second wave (0.8 million tonnes) and taking into account the return of 132,000 tonnes planned by Spain for the 2009|10 marketing year amounted to 5.6 million tonnes. Therefore, around 360,000 tonnes still need to be returned in order for the reform target of a six million tonne reduction in European sugar production in 2010 to be met.   

A further quota return scheme for the period until  January 31, 2009, albeit with a reduction in compensation from €625 to €520 per tonne (of which 90% will allocated to the sugar producer and 10% to the grower) and no additional ”top up” compensation for growers, is aimed at securing this outstanding volume.

Consequently, sugar production in the EU in 2008 will drop from the original forecast of 21 million tonnes (quotas plus C Sugar) to around 14 million tonnes. A total of 75 sugar refineries have been closed in the course of the reform programme with the loss of 10,000 jobs. The reform has been accountable for the EU becoming a net importer of sugar, having previously been a net exporter.

As a result of the quota returns, around one million hectares of former sugar beet growing land has been freed up which, in addition to the EU Commission’s suspension of the 10% set-aside scheme, will enable more land to be dedicated to growing beet for the production of bioethanol and cereal crops. Contrary to certain claims, bioethanol production in Europe is not being promoted at the cost of food production. 

AGRANA quota returns
During the course of the first wave of quota returns, the Agrana Group renounced a total of 107,209 tonnes of its original quota of white sugar of 735,565 tonnes. This was followed by a further 9,855 tonnes in the second wave; making a total of 117,064 tonnes. As such, this represents a total reduction of 15.9% to 618,502 tonnes.

The following table provides an overview of AGRANA’s quota returns by country:

Sugar quota returns in the EU-25
The following table provides a breakdown of total sugar quota returns in the entire EU:  

* Source: Sugar Management Committee April 9, 2008 incl. AGRANA est.

The EU sugar industry has undertaken the necessary restructuring steps and quota renunciations. The sugar industry expects the EU Commission to establish the necessary context in the course of the WTO negotiations in order to ensure the long-term survival of the EU sugar industry.