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The EU Council of Agriculture Ministers has approved the sugar regime reform proposal of the European Commission. The initial reform target of withdrawing 6 million tonnes of sugar quota from the market had been threatened with failure, as the consistent implementation of these plans was frequently blocked at the level of individual member countries.

The key new features of the sugar regime are:

• The portion of quota withdrawal compensation to be paid to farmers is fixed at EUR 237.5 per tonne and 10% of the compensation to be received by sugar manufacturers.
• No levy is charged on the preventive withdrawal 2007/08 if at least this quantity is renounced (13.5% reduction for most countries, 6.21% for Hungary, 7.29% for Czech Republic, 4.32% for Slovakia, 13.5% for Romania).

 

AGRANA, the leading sugar producer in Central Europe, expects a rapid implementation of this readjustment. Following the relinquishment of 2.3 million tonnes of quota in the first year of implementation, an additional 2.3 million tonnes is now expected to be surrendered.

To achieve the Commission's target of a reduction of 6 million tonnes will thus require another 1.4 million tonnes of quota to be given up in a final cut, expected for 2009/10. However, this last reduction will be made without restructuring payments.

The ultimate size of this final cut still depends in large part on the imports from LDC countries.

As the European Commission's original expectation calling for the non-competitive countries to withdraw completely from production was ultimately reduced by half as a result of political compromise, the reform target is now only attainable if the more competitive countries also reduce their respective quota by 13.5%.

Based on information currently available, the entire European sugar industry - which applauds this "reform of the reform" - is willing to carry out this reduction. All measures could be rapidly implemented.

The changes to the reform will also affect Austria; the quota would ease from currently 405,000 tonnes of sugar to 351,000 tonnes, corresponding to 2.3 million tonnes of quota beet. However, the reform changes will have no effect on Austria's sugar industry.

With the streamlining of production through the closing of the sugar plant in Hohenau, AGRANA had already anticipated this development and put in place an efficient, cost-optimised facility location structure. The campaign duration in Austria would be 87 days in the future, not counting the processing of ethanol beets or industrial beets for the fermentation industry.

 

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