EU: Sugar reform pits France against UK

Published: 06/18/2012, 11:08:04 AM

European Union proposals to change rules on sugar output and usage will pit France, the biggest food producer in the bloc, against the U.K. next week when members of the European Parliament meet in Brussels, according to Bloomberg.

Sugar quotas that limit production should expire Sept. 30, 2015, EU Agriculture Commissioner Dacian Ciolos proposed in October. The European Parliament will consider on June 18 and June 19 whether to end that policy that caused sugar supply shortages in the bloc for the past two years.

Sugarbeet growers backed by France oppose the plan, saying they need at least until 2020 to become more competitive, while the U.K. says the proposal will allow farmers to grow their business. While international prices have fallen 20% in London over the past year, white sugar in the EU averaged EUR711 (US$898) a metric tonne in March, the highest since at least July 2006, commission data as of May 3 show. An EU sugar users' group backed by Kraft Foods Inc. opposes France's plan.

"European farmers are going to have huge opportunities to feed an increasingly hungry world," the U.K. Department of Environment, Food and Rural Affairs wrote in an e-mailed comment yesterday. "Scrapping counter-productive sugarbeet quotas will up production, stop shortages and bring down prices."

The European Parliament gets the final say on farm policy for the first time, Jan Jakubov, agriculture spokesman, said by phone from Brussels. Policy makers for France and the U.K. will attend the meeting next week when Parliament's rapporteurs will present their view on the reforms for the first time, he said.

 "I'll defend, in France's name, the position that consists of maintaining the current regulation until 2020 to allow this industry to adjust, and at the same time give it the outlook on the future that it seeks," French Agriculture Minister Stephane Le Foll told sugarbeet growers at an industry meeting in Reims on June 12. "I also know of the need to have a little bit more time that's required so you can adjust."

The end of sugar quotas would mean that French production would have to compete with Thailand, the world's second-biggest exporter, and India, the second largest producer. Brazil is the top exporter and producer and its production costs have been climbing because of labor costs and strengthening value of the real currency since 2000.

The Committee of European Sugar Users, representing companies including Kraft Food Inc. and Nestle SA, is opposed to France's plan, the Brussels-based group said in a statement.

"EU sugar users have seen an increase of 40%in sugar prices within the last year, leading to significant financial instability for many food manufacturers across Europe," said Robert Guichard, president of the committee and procurement manager of sweeteners for Kraft Foods in Paris.

"Postponing again the debate to 2018 is not going to help prepare EU farmers or the food sectors to adapt to future market challenges," he said. The committee "demands that the commission proposal of abolishing quotas in 2015 is respected."

The EU spent four years since 2006 shrinking its sugar-beet industry to comply with a ruling by the World Trade Organization limiting its exports.

After the reform, the bloc became a net importer and dependent on supplies from a group of least developed countries and some nations of the African, Caribbean and Pacific group of countries that have preferential access to the EU market.

"The problem facing the EU has been the limited availability of preferential imports from least developed countries and ACP," LMC International Ltd. and London-based Overseas Development Institute said in a report at the U.K. Parliament's inquiry into the EU sugar regime on June 13.

LMC International is an Oxford, England-based agriculture research company and Overseas Development Institute focuses on ways to reduce poverty in developing countries. Shortages of sugar in Europe are set to continue through 2015, they said in the report to the U.K. Parliament.

The removal of sugar quotas is likely to reduce the EU sugar price by EUR100 a tonne, LMC International and the Overseas Development Institute said. White, or refined, sugar on NYSE Liffe settled yesterday at US$566.70 a tonne.

The elimination of sugar production quotas "must only be done alongside opening up markets for tropical cane sugar, which is crucial for British refiners, food manufacturers, and consumers," Defra said.

The EU has not proposed changing import duties. The levy is EUR339 a tonne on imports of raw sugar and EUR419 a tonne for white sugar.