Impact of the EU sugar reform on the beet processing sector

Impact of the EU sugar reform on

the beet processing sector

Sergey Gudoshnikov

Senior Economist

International Sugar Organization, London

OECD Workshop on Evaluation of CAP Reform at Disaggregated Level

Paris, 10-11 March 2010

International Sugar Organization

o Goals of the EU sugar reform

o Major features of the reform

o What has been achieved by 2010 in

terms of restructuring in the beet

processing factor?

o New look EU sugar balance sheet

o International implications: impact on

world market and rumifications for

preferential exporters

http://www.enchantedlearning.com/europe/europe/flag/



The regime consisted of four pillars:

price guarantees

production quotas

production levies and export refunds

border protection, which later became a

system of preferential import quotas

The sugar regime remained largely unchanged

from the system that had been originally

established in 1968.




In 2005 the EU sugar balance looked as follows:

Production – 21.697 mln tonnes, raw value;

Consumption – 16.765 mln tonnes;

Imports – 2.417 mln tonnes; and

Exports – 6.639 mln tonnes.




to integrate finally the sugar sector in the

already reformed CAP drastically reducing

budgetary support to sugar exporters.

in terms of sugar balance sheet

to cut production by about 6 mln tonnes to 13-

14 mln tones, raw value,

to reduce exports by about 4-4.5 mln tonnes to

1.4 mln tonnes,

to double sugar imports to about 4.5 mln

tonnes.




- 36% reduction of reference prices from

EUR631.9/tonne to EUR404.4/tonne by in 2009/10

- to replace intervention system by a system of

private storage

- a restructuring fund would pay a basic

EUR730/tonne in the first two years for producers,

renouncing their quotas and quitting the industry,

with at least 10% going to ex-growers.

- the quota system was simplified. The “A” and

“B” quotas were merged into a single quota.




Evolution of EU reference prices for sugar

2006/07

2007/08

2008/09

2009/10

White sugar, EUR/tonne

631.9 631.9 541.5 404.4

Cumulative reduction in %

0 14 36




Restructuring aid

€/tonne 2006/07 2007/08 2008/09 2009/10 2010/11

onwards

Restructuring Levy charged by processors to sugar users and consumers [Fund revenue]

126.4 173.8 113.3 Nil Nil

Restructuring Aid payable per tonne of quota renounced by processors [Fund spending]

730 730 625 520 Nil




Restructuring aid

In order to receive restructuring aid a processor

has to renounce his quota,

close a factory and fully dismantle it.

The Fund paid reduced rates of aid for factories

which were only partially

demolished (75% in the case of non-sugar uses,

as bioethanol and 35%

in the case of sugar uses)




Restructuring aid

To receive the restructuring aid, beet sugar processors had to

submit:

- a restructuring plan on which growers had been consulted

- a commitment to renounce production quota and fully dismantle

production facilities

- a social plan for re-training, redeployment and early retirement

of the workers where

factories were being closed, and

- an environmental plan to restore the “good conditions of the

factory site”.





processing factor?

EU reference price 404.4 €/t - 36 %

EU minimum beet price 26.29 €/t - 45%

Production under quota 13 Mt - 32 %

Imports 3.5 – 4 Mt + 50%

Exports 1.37 Mt * - 70 %


■ = 100 %

■ > 50 %

■ < 50 %

Decrease in beet area

2005 - 2009: -700 000 ha





processing factor?

100.000

200.000

300.000

400.000

500.000

2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10

Evolution in the number of growers

in the EU-27





processing factor?

6

7

8

9

10

11

12

2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10

EU-27

EU-15

Source : CIBE

Evolution of the average sugar yield

in the EU (t of sugar per ha)


Decrease in number of

factories:

From 188 (2005) to 106

(2009)




09/10

08/09

07/08

06/07

05/06

04/05

04/03

02/03

Production 17.4 15.4 17.7 18.7 20.6 21.9 20.2 20.9

Consumption 19.9 19.7 19.6 19.6 18.5 17.7 18.5 18.2

Exports 2.0 0.7 1.1 1.6 8.0 6.0 4.4 6.2

Imports 3.7 3.7 3.3 3.3 3.2 3.3 2.4 2.7

EU-27 Sugar Balance (1,000 tonnes, raw value)




The structural deficit of the EU

sugar balance

It is not likely to disappear in the

foreseable future

Production limited by quotas and

flat consumption will result in

higher imports

The gap between domestic

consumption and production can

be as high as 4.5 mln tonnes as

against surplus of 3.1 mln tonnes

before the reform




2009/10 – back to large scale exports?

At the end of January, the Commission allowed an additional 0.5

mln tonne export of out-of-quota sugar following considerable

increases in sugar production in 2009/10.

The allowance has been announced as a temporary measure.

According to the European Commission, it fully respects the EU's

international obligations and the decision has been made possible

by the exceptional market conditions at both the EU and world

level, as the current world market prices are significantly higher

than the EU reference price (EUR404.4/tonne or USD586.9/tonne).



o International implications: impact

on world market and rumifications for


World market sugar prices

95/9

6

96/9

7

97/9

8

98/9

9

99/0

0

00/0

1

01/0

2

02/0

3

03/0

4

04/0

5

05/0

6

06/0

7

07/0

8

08/0

9

09/1

0

US

cen

ts/l

b

No immediate impact

...but in the longer

run, the absence of

guaranteed supply

from the EU cannot

be underestimated






The sugar regime reform has not changed the concept of restricted market

access for imported sugar

Prohibitive import duties + safeguard duty=

EUR412.50/t (USD555.55/t) for raws

EUR 499.10/t (USD671.12/t)for whites

Most sugar imported to the EU has to be delivered under preferential access

schemes






Existing preferential access schemes:

o the ACP/India Sugar Protocol replaced by EPA trade regime from 1 October 2009 o deliveries under the EBA initiative; o regional TRQ; and o WTO quota under the WTO most-favoured-nation principle (WTO schedule CXL) o imports for industrial use






On one hand, prices paid for sugar imported to the EU are to decrease significantly (although they will likely remain higher than world market prices).

On the other hand, the level of access to the EU market increases considerably.






In general, in the case of preferential exporters the reform of the EU sugar regime works towards the same goal as within the Community. On one hand, the reform stimulates efficient producers to increase production, which can be directed to the EU market. On the other hand, due to severe cuts in prices high cost producers are expected to abandon sugar production or consolidate production to achieve efficiency goals.


Bangladesh Barbados

Burkina Faso

Belize Cambodia Chad

Congo Congo Dem. Rep.

Cote d’Ivoire Dominican Rep.

Ethiopia Guyana

Fiji

Jamaica Laos

Kenya Mauritius

Madagascar Malawi

Mozambique

Nepal Senegal

Sudan

Suriname

Swaziland

Tanzania Zambia

Zimbabwe

Cuba

Brazil

Moldova Western Balkans


Thank you

for your attention

Sergey Gudoshnikov

Senior Economist International Sugar Organization

1 Canada Square, Canary Wharf

London E14 5AA

United Kingdom

tel: +44 – 20 – 7513 1144

fax: +44 – 20 – 7513 1146, e-mail: [email protected]

Impact of the EU sugar reform on the beet processing sector

Documents

Transcript of Impact of the EU sugar reform on the beet processing sector