AGRANA Plans to Maintain Output Volumes even after Reform of the EU Common Market Organization (CMO) for the Sugar Sector

Date: 24.11.2005

The European Union’s agriculture ministers today came to an agreement on reform of the EU sugar CMO, whereby the beet price will be cut stepwise within the next four years by 39.4 per cent instead of 42.6 per cent.
The reference price for sugar will remain unchanged at 631.9 EUR per ton in the years 2006|07 and 2007|08 and will decrease by 36 per cent the following two years.

AGRANA – as Central Europe’s leading sugar producers – plans to maintain present output volumes even under the new regime.

Firstly, AGRANA’s beet growing areas are located mainly in agriculturally favourable regions in the EU.  Secondly, cheaper sugar prices in the future will go hand-in-hand with correspondingly lower beet prices.  Moreover, the actual development of market prices will depend considerably on the acceptance of the planned restructuring fund among less competitive sugar companies and the reduction in total European output that it achieves.

AGRANA will need to take action to rationalize and optimize its costs so as to ensure its sustained competitiveness within the sugar sector.  Such action will also include re-examining its current production structures in Austria, Hungary, Slovakia and the Czech Republic.  The appropriate decisions will be made by the end of the group’s current 2005|06 financial year.

From October 2007, AGRANA’s new bioethanol plant in Pischelsdorf will be one cushion against the prohibition of C sugar exports by the WTO because it will also be able to process concentrated sugar beet juice in addition to wheat, which will be its main raw material.

At the same time, the new sugar CMO will be creating added opportunities for the AGRANA Group.  The hike in the European isoglucose quota will allow AGRANA’s Hungarian subsidiary Hungrana to step up its isoglucose output by about 80,000 tonnes.  What is more, AGRANA will also consider increasing its raw sugar refining operations to supplement beet sugar production within the scope of the forthcoming sugar CMO from 2009.

Continuing to ensure that the sugar industry is protected against pressure from outside the EU after reform of the sugar CMO will be essential if beet sugar production in Europe is to be sustained.  To that end, it will be important for the ongoing WTO round to retain the special safeguard clause and if necessary to award sugar “sensitive product” status.