EU sugar sector must retain strategic importance after reform: report
Currently the European sugar market is one of the EU's most regulated agri-food markets.
But the reform, set to come into force on 30 September 2017, will see the end of EU sugar production quotas; no more minimum purchase price of sugar beet (currently €26.29 per tonne); and an end to the 0.72 million tonnes cap on production of isoglucose, known as high fructose corn syrup in the US.
A recent report, entitled The post-quotas EU sugar sector, commissioned by the European Parliament's Committee on Agriculture and Rural
Development, looks at what changes the liberalisation of the market will bring and how the Common Agricultural Policy (CAP) should use market instruments to maintain sugar production.
Because with world demand for sugar predicted to grow by 2% per year due to a growing world population and changing consumption patterns stimulating demand, there is an opportunity for Europe, write the authors.
“The great economic, social and environmental importance [of sugar] indicates that future policy towards the sector should include solutions that will enable the cultivation of sugar beet and sugar production to be maintained, at least in the most efficient and competitive regions of the EU.”
In 2014 there were more than 139,000 sugar beet growers in the EU and around 30,000 people employed in the sugar industry.
Three scenarios
The authors look at three possible scenarios following the reform, and tools that could be leveraged in each case.
The first scenario assumes that world prices of sugar remain at the current level of €350 per tonne. This relatively low price would require restructuring in
the industry. The authors predict a fall in the area of land cultivated for sugar beet but which would be compensated by higher yields per hectare. Exports would increase due to a fall in predicted fall in internal demand and the EU would gradually move towards self-sufficiency.
The second scenario assumes greater long-term falls in world prices to around €250 per tonne. In such conditions, “deep restructuring” of the industry would be necessary, meaning the closure of many sugar factories and drops in the amount of land devoted to sugar beets. Sugar production would
remain only in the most competitive regions of the EU and the bloc would be a net importer of sugar.
The third scenario envisages a rise in world prices to €500 per tonne due to bad weather conditions hitting supply in other regions, a more positive
economic outlook or higher fuel prices affecting the market for bio-ethanol – an “optimistic situation”. In this case production could be upped to reach around 18.7 million tonnes, exceeding domestic demand with the remainder exported.
Safety net
Future market policy should mitigate these risks by introducing a safety net using existing regulatory and budgetary constraints, although the authors note that the complexity of the solutions means it is difficult to achieve all targets.
They call for a number of measures to be adopted, such as implementing a system of long-term risk management which is necessary given the increasingly volatility of agricultural markets and fluctuating prices.
“It should enable the EU institutions, in direct response to the rapid changes in the situation in the sugar market, to maintain aid for private storage and active trade and promotional policy.
“The EU market should be protected by customs and quasi and out-of-tariffs instruments and imports should be allowed only within the framework of duty free quotas, which should not be increased.”
Farmers’ incomes should be made more stable through direct payments linked to the area of sugar beet cultivation or income insurance policies, while growers’ position in the food chain should be strengthened.
Sustainable sugar
Reasons for maintaining high levels of sugar beet production in Europe also include sustainability, they say.
“[Sugar beet] has the highest productivity per unit of land. In cultivation, it is recommended to use organic fertilisers. The cultivation of sugar beet is supported by a high level of knowledge of the crop among farmers and specialist machinery. In this context, reducing the area of sugar beet would have a negative impact not only on the market situation, but also on the sustainable development of agriculture. The area of sugar beet cultivation in the world and the EU is steadily falling. This trend should be stopped for economic and environmental reasons.”
Other experts, however, have warned that the end of quotas next year could be disastrous for public health as the market is flooded with cheap sugar, increasing consumption of sugary foods as manufacturers reformulate the cheap ingredient back into products..
The full EC report can be read here.
