Markets & politics

The market conditions for the beet farmers and sugar industry in the European Union changed dramatically on 1 July 2006. Q&As on the European Sugar Regime here:

FAQs

Why was the Sugar Regime reformed?
The EU Sugar Regime had basically been unchanged since its introduction in 1968 (production quotas, minimum prices, import protection).
A fundamental reform came into force on 1 July 2006 in response to

• Revised trading and agropolicy targets (liberalisation, market opening, and particularly, aid for developing countries, WTO-conform agropolicy)
• New EU preference treaties
• Massive export restrictions pursuant to the WTO sugar resolution adopted on 28 April 2005

Trade policy reasons

• “Everything but arms”
  With the EBA initiative, EU economics ministers in 2001 opened the doors for the step-by-step increase in duty-free imports of sugar from the 50 “Least developed countries in the world“ (LDC). Unlimited imports of sugar in this context are allowed from 2009.
• Preference treaties
  In addition to the duty-free import of around 1.6 million tonnes sugar from India (special preference sugar) and the African-Caribbean–Pacific states (ACP Treaty) initiated in 1975, the EU has also opened up the common market to duty-free sugar imports from some neighbouring countries (Balkan sugar). Import quotas defined within the EU Preference Treaty allow the following amounts of sugar to be imported from the stated countries: Serbia-Montenegro (180,000 tonnes), Bosnia Herzegovina (12,000 tonnes), Albania (1,000 tonnes) and Croatia (180,000 tonnes).
• WTO sugar decision
  The decision reached by the WTO Panel on 28 April 2005 forbids the EU to continue the re-export of 1.3 million tonnes of ACP sugar, and to export sugar produced in excess of the EU production quota (surplus sugar). Brazil, Thailand and Australia had initiated proceedings at the WTO against the export of EU sugar. The WTO decision alone slashes the exports of EU sugar by around five million tonnes per year from the 2006/07 sugar financial year.

The total adjustments required in response to the massive curtailment of exports and the increasing sugar imports accounts for more than a third of the previous total sugar production volume of around 21 million tonnes.

What is the main impact of the new Sugar Regime?
The aim of the EU reforms is to maintain the competitiveness of the sugar beet industry in the EU.

Three regulations at the heart of the new Sugar Regime

• The phased reduction in the price of beet by 39.7 per cent, and in the price of sugar by 36 per cent, over a period of four years
• Partial compensation to the beet farmers for lost income; no compensation for sugar producers
• Voluntary return of around 4.5 million tonnes of EU production quota cushioned by a four-year restructuring fund. This fund is financed by the sugar industry to motivate non-competitive regions to abandon sugar production.

What is the strategy behind the fixed prices for sugar and sugar beet in the EU?
The dramatic price cuts are the EU’s response to the planned removal of import duties by the WTO. The low prices are also intended to improve the market opportunities for EU sugar in the face of the growing volumes of duty-free sugar imports. This leads to massive cuts for beet farmers and sugar producers, which are only partially compensated for in the case of the beet farmers by compensation payments in the form of direct subsidies.

Price cuts for sugar and sugar beet

Prices (in four phases from 2006/07)		2006 /07	2007 /08	2008 /09	2009 /10 ff
Reference price white sugar	€/t	631,9	631,9	541,5	404,4
Cumulative reduction	%	0	0	14,4	36,0
Structure royalties	€/t	126,4	173,8	113,3	0
Net reference price	€/t	505,5	458,1	428,2	404,4
Cumulative reduction	%	20,0	27,5	32,2	36,0
Raw sugar reference price	€/t	496,8	496,8	448,8	335,2
Sugar beet minimum price	€/t	32,9	29,8	27,8	26,3
Cumulative reduction	%	24,7	31,7	36,2	39,7

compared to 43.63 €/Tonne A/B sugar beet to 2005/06