sugaronline.com

For a person who has spent way too many years in Brussels, there are few things that can get the heart a fluttering like EU sugar reform. No, that’s not a facetious statement. It’s just how it is. It fills the mind with nostalgia about a youth misspent in meetings with European Commission officials, wasting too much breath trying to educate stubborn NGOs, and working with producers from African and European countries alike.

Five short years ago, the EU stuck it to the developing countries, and stuck it to them good. A few EU countries got the short shrift as well, but the strong survived to fight another day. Or so they thought.

Ladies and Gentlemen, may we present…the end of sugar quotas.

Yes, it’s true. European sugarbeet farmers were no doubt shrugging their shoulders with an ‘eh’ and waiving a hand in typical French-style disbelief when Nestle first made its public demands in August that sugarbeet production quotas must be eliminated as part of the upcoming reform of the Common Agriculture Policy. That laissez-faire response, however, has quickly turned to something much closer to aghast.

Of course the sugar using side of the industry wanted a drastic response to the €1,000 per tonne they were paying the past few months as it became apparent that the EU was out of sugar and there were few exporters willing or able to close the supply gap. They accused the Commission of not responding fast enough to the sugar price crisis, for creating the crisis in the first place with the reform in 2005, and for all together coddling these sugarbeet farmers.

But coddling is about the farthest thing away from what the Commission is actually doing.

According to the Commission, this is the next step in simplifying the overall Common Agriculture Policy as sugar is the last commodity hanging on to antiquated production quotas. The farmers of course are crying foul, saying that after so many hard years of reform, they are in too weak of a position to handle a ‘free for all’. The remaining producers from the Africa Caribbean and Pacific countries aren’t thrilled at being left out of the decision to end quotas (no doubt the EU farmers feel the same) and expect the EU to turn into major exporters overnight that will kill the global sugar price while they suffer in open markets.

Perhaps all of these statements are true. Some of them are probably exaggerated while others are underestimated. No matter what, it means the next 18 months or so should be rather interesting.

The press has put most of the focus on the reaction from sugar users, not surprisingly as those are the companies who support those publications through advertising. They’re thrilled. They feel like they’ve won the day, even though the battle hasn’t even started, yet they’re not happy with the idea that nothing will be done to help them out of the tight spot they’re in at the minute. But at least they have Oct. 1, 2016 to look forward to when quotas will come to an end, forever.

Or at least that’s what the EC is trying to get through. The UK’s National Farmers Union as well as the International Confederation of European Beet Growers (CIBE) are pushing for the quotas to remain in place until 2020 in order to give the industry enough time to ramp back up again after being cut down so sharply during the last round of reform.

It goes a bit beyond that though. The NFU seem to be asking, while CIBE seems to be fighting mad. They’ve all but declared war on the European Commission, saying that they’ll be pushing the Member States and the European Parliament to take their side and win out over the EC’s demands through the ever-complicated co-decision procedure that is meant to keep the Commission from exerting absolute power. They basically are saying that by eliminating sugarbeet quotas, the sugarbeet industry will be destroyed.

Funny, that already happened to a handful of European countries as well as a few others, but the farmers—and certainly not the Commission—didn’t seem too worried about the ‘greater good’ back in 2005.

As they say in some circles, payback’s a bitch.

Then there are the developing countries, who typically rely on the EU market to pay them a decent price even when the world price is low. Now that the world price has been high, well above the EU price, their sugar has gone to other markets. Europe is a jealous mistress though. She wants to have you around to abuse you, but if you find someone else, she won’t let you back in. So now that Europe could in theory produce as much sugar as it wants to from 2016/17, the ACP countries are worried they’ll do just that, leaving the ACP with no chance to make a decent living on sugar.

CIBE seems to think that there isn’t enough production capacity in order to become massive exporters, at least not right away and at least not at the scale that the ACP is worried about. They see themselves as a sort of wounded animal who needs time to heal before they can pounce again. It would take until at least 2020 to achieve that, which is why they’re asking for the quota extension. But the ACP shouldn’t worry, really, since the EU will be just as limited in its exports by the WTO as it has been.

For those who haven’t taken the time to read the legislative proposals put forward by the EC this week, it’s worth a read as there are some interesting nuggets that haven’t yet been reported by the press.

Firstly is the good news. Even though quotas will go away, reference prices will remain: EUR404,4/tonne for white sugar and EUR335,2/tonne for raw sugar. Until the next stab at reform, at least.

There’s also the nod to Finland that none of the other countries who suffered at the hand of sugar reform got. The proposal gives Finland, and only Finland, the opportunity to subsidise its beet farmers up to EUR350 per hectare as Finnish “sugarbeet growing is subject to particular geographical and climatic conditions which will adversely affect the sector beyond the general effects of the sugar reform.”

How nice for them.

There’s some slightly odd references to new policy proposals as well that deserve noting. Let’s examine for a moment the reasoning that the EC provides for getting rid of sugar quotas, again, for the greater good:

“From a simplification perspective, doing away with certain sectoral aids, the decoupling of the aid scheme in the silk worm sector, ending the sugar quota system and removing the requirements for registration of supply contracts and for attestation of equivalence in the hops sector will positively impact the burden on Member States and red tape for operators. It will no longer be necessary to maintain a capacity to implement the sectoral aid schemes and to allocate resources to control them.”

To the EC, it seems, the importance of sugar lies somewhere between the silk worm sector and the hops sector. Well good, it’s important to have that understood from the get go. Now there’s no need to spend millions lobbying them to change their mind.

Then there’s the idea that the Commission wants to get into business of the nitty gritty of contracts. For one, there’s the idea that “the standard provisions governing agreements between [producers and farmers] should be established,” because “instruments will still be needed after the end of the quota system to ensure a fair balance of rights and obligations between sugar undertakings and sugar beet growers.”

It doesn’t stop there, however.

“In order to taking [sic] into account the specificities of the sugar sector and the interests of all parties, the power to adopt certain acts in accordance with Article 290 of the Treaty should be delegated to the Commission in respect of such agreements, in particular as regards the conditions governing the purchase, delivery, taking over and payment of beet.”

Then last, but certainly not least, “The terms for buying sugar beet and sugar cane shall be governed by written agreements within the trade concluded between Union growers of these raw materials and Union sugar undertakings.”

This is what is called regulating while deregulating. Or creating an even greater mess than what you had before. Now it’s time for the real games to begin, and bets to start on what the real sugar reform looks like by the time it’s agreed. If past experience counts for anything, don’t expect there to be much difference between what was published Oct. 12 and what ends up in the EU’s Official Journal.