European Commission's Proposals on Sugar Sector Reform - the UK Beet Sugar Industry Position September 2005
Introduction On 22nd June 2005 the European Commission published draft proposals for reforming the EU sugar sector. These proposals are now the subject of debate and negotiation in the Council of Ministers. The European Parliament must be consulted before the proposals can be formally adopted.. European Commission's Objectives for Reform - Creation of an efficient and sustainable European sugar industry, able to compete in a more de-regulated environment.
- European sugar market brought into balance:
- Beet quotas reduced by 5 million tonnes
- Subsidised exports phased out
- Non-quota production reduced
- Reduction in prices to bring Europe more into balance with global sugar producers.
- Greater flexibility and competition for beet and cane supplies amongst the remaining EU processing and refining industries.
Key Elements of the Proposals - Support prices for white sugar to be cut by 39% over four years (net support prices for processors to be cut by 39% over two years).
- Support prices for sugar beet to be cut by 43% over two years (25% in year 1, and a further 18% in year 2).
- Replacement of intervention by a reference price. This will be the trigger level for private storage and sets the levels of the Minimum Beet Price and guaranteed price for imports.
- Compensation to farmers at 60% of the revenue loss, to be decoupled and included in the Single Payment Scheme. Reference period to be chosen by the Member State.
- Voluntary EU Restructuring Scheme to be introduced for EU sugar factories, operating over four years and consisting of a payment to encourage factory closure and the relinquishment of quota. The scheme is to be financed by a levy on sugar processors, lasting three years.
- Up to 1 million tonnes of "new" quota can be purchased by EU processors. Our UK share is 83,000 tonnes.
- New regime to last until 2014/15 without review.
- Imports from the LDCs to be retained as under the Everything But Arms concession of February 2001.
- Introduction of a "Production Charge" of €12/tonne to be paid by the industry, although no reason for this charge has been suggested.
- Sugar beet to qualify for set-aside payments when grown as a non-food crop (e.g. bioethanol) and would be eligible for the energy crop aid of 45 euros/hectare.
Summary of Proposals on Volume and Price Volume (Million tonnes of sugar)
|
NOW |
2012/13 |
| EU Production [Quotas] |
20.3 [17.4] |
12.4 [12.4] |
| EU Consumption |
(16.3) |
(15.7) |
| Exports |
(5.9) |
(0.6) |
| Imports |
1.9 |
3.9 | Price (Euros / tonne)
|
NOW |
06/07 |
07/08 |
08/09 |
09/10 |
Sugar Support "Reference Price"
% Change |
632
- |
632
- |
476
-25% |
450
-29% |
385
-39% |
| Restructuring Levy |
|
126 |
91 |
65 |
- |
Sugar Price less Levy
% Change |
|
506
-20% |
385
-39% |
385
-39% |
385
-39% |
Beet Price
% Change |
44
- |
33
-25% |
25
-43% |
25
-43% |
25
-43% |
Cane Raw Price
% Change |
524
- |
497
-5% |
395
-24% |
373
-29% |
319
-39% | UK BEET SUGAR INDUSTRY POSITION The following is a summary of the joint position of the UK Beet Sugar Industry on sugar reform. For more information on the detailed position of the NFU or British Sugar, please contact us. Why Reform is Needed - The UK sugar industry is among the most innovative and cost-effective in the EU25. Having already undergone a major restructuring process, it is internationally competitive and well placed to have a viable future, and to adapt to the changes brought by the reform process.
- The UK industry recognises the need for change in the European sugar sector, and supports the European Commission’s objective of creating a competitive and sustainable industry for the future.
- We therefore believe the sector needs a progressive reform, and support a number of elements of the Commission’s proposals.
- We do however feel that reform has to be implemented in an effective and balanced way in order to encourage efficient producers like ours to flourish, and to create genuine benefits for consumers and developing countries.
- This is why we urge that the following recommendations are taken into account when reforming the sector. They are designed both to help achieve the EU’s reform objectives, and to maintain the UK sugar industry’s competitiveness and guarantee its viability in the long term.
Price - Price reduction must be carefully balanced. The support price must be set at a level low enough to drive the restructuring scheme and help bring European supply/demand into balance, but high enough to enable beet to be grown in efficient producing areas.
- Price reductions to €385 for sugar and €25 for beet are unnecessarily severe to meet the EU’s objectives, and would risk damaging even the most efficient industries in Europe, including the UK’s.
- The Reference Price mechanism will not work effectively. To avoid the risk of market collapse in the initial years, while the restructuring scheme is being implemented and until the EU market restabilises, the Intervention Price should be retained.
Beet Supplies - At €25/tonne, beet supplies become critical, even in the most efficient growing regions of Europe like the UK.
- Grower compensation must be consistently applied across EU, to avoid competitive distortions arising between Member States. This means that grower compensation must be mandatorily decoupled in all Member States, as stated in the Commission’s proposal.
Imports - Imports should be managed as effectively as possible, assuming that EBA quotas will not be introduced.
- Automatic and quantified "safeguard measures" should be introduced to prevent imports flooding the market.
- Robust rules of origin should be implemented to prevent fraud.
- Swaps bring little development benefit for developing countries and should not be allowed.
Exports - When implementing the WTO Sugar Panel ruling, the EU should keep the option of exporting quota and non-quota sugar, up to the level of the EU’s WTO volume ceiling of 1.4 million tonnes, to allow for climatic fluctuations when growing the crop.
ACP/Refiners - Measures introduced for refiners should be fair and balanced relative to the beet sector, and should not provide special treatment which places them at a competitive advantage.
Production Charge - The Production Charge is not justified and should be scrapped.
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